Best emerging market debt house

CITI: Citi’s consistency in the debt capital markets of all developing regions makes the bank stand out

The pecking order in the emerging markets debt world is slowly shifting. For the past three years only three firms – Citi, Credit Suisse and Deutsche Bank – have contested the best global emerging markets debt house award. The same banks are in the frame again but this year HSBC has put its name into the mix.

Next year promises to see further change as other institutions ramp up their emerging markets business. JPMorgan has got its act together again after a few lean years. Barclays Capital was third in the league tables for all international bonds in the year to May and is now a recognized big hitter in the asset class.

Standard Chartered, already a leading bookrunner in local-currency transactions, is on a hiring spree in its investment banking and capital markets business in a bid to become more competitive internationally.

Atiq Rehman, Citi: embedded

In specific regions, too, niche players are raising their game. In the Middle East, for example, RBS and BNP Paribas are winning important sovereign and corporate mandates.

The big three will have to stay on their toes if they are to remain the banks to beat. HSBC has now also joined the top table. For many years, its emerging markets debt business – an area where it should be a leading player given its size and history – was too Asia-centric. This year it has excelled in Latin America and the Middle East too. Indeed HSBC can count itself unlucky not to win the global award given that it took the regional awards for Asia, Latin America and the Middle East.

Yet the global award this year goes to Citi not because it’s necessarily the best in any specific region but because it is the most consistent underwriter of international bonds across all geographies.

As such, Citi heads the league table rankings, according to Dealogic, for all emerging markets international bonds for the 12 months from May 1 2008. It achieved this position during a period when there were real doubts about the very future of the bank. That Citi still managed to churn out so many deals says something for the bank’s relationships with its clients and the tenacity of its debt team.

Across the emerging markets spectrum, Citi can point to key deals for sovereigns, corporates and financial institutions.

In Latin America, the bank was lead manager on Colombia’s $1 billion reopening, the biggest sovereign reopening since January 2008. It was also involved in Pemex’s $2 billion, 10-year bond, the biggest transaction out of the region during the review period. Its deal for Digicel, a Caribbean telecoms company, is the only high-yield bond out of the region this year. Citi led two important sovereign liability management transactions, for Uruguay and Panama.

In emerging Europe, the Middle East and Africa, the bank’s achievements in 2009 include the first dollar sovereign, for Turkey; the first euro sovereign, for Poland; the biggest dollar sovereign, for Abu Dhabi; the first corporate deal, for Israel Electric. Citi also lead-managed three other hugely impressive deals out of the region in the 12 months under review: a dual-tranche combined $1.75 billion bond for Mubadala, a €600 million, six-year bond for Cez, and a dual-tranche $3 billion all-in bond for Kazmunaigas. The latter was a debut bond, priced in June 2008 just before capital markets became closed to borrowers from Kazakhstan.

In Asia, Citi’s highlights include Kexim’s €750 million global bond, the first euro issue out of the region last year; Posco’s $700 million senior notes, the first pure corporate bond out of Asia ex-Japan and Australia in 2009; and Vedanta’s $1.25 billion dual-tranche offering, the biggest Asian high-yield transaction. Another deal worth emphasizing is Kookmin Bank’s $1 billion, five-year covered bond that Citi executed with HSBC. The transaction shows that the bank can innovate, a skill that rivals say Citi generally lacks.

All these deals illustrate Citi’s strength in international bonds – the key criterion for the award. But Citi’s achievements in local capital markets cannot be ignored. Nor, despite the bank’s troubles, can its leading position in the syndicated loans market be dismissed.

“Citi’s position in the emerging markets remains unique and dominant,” says Atiq Rehman, co-head of capital markets origination for Europe, Middle East and Africa at the bank. “The embedded nature of the business across the world enables us to have a much better knowledge and assessment of what’s going on.”

He adds that despite Citi’s woes, clients have continued to back the bank. “Most banks have faced capital and liquidity constraints and we were obviously part of that process but clients have been looking for superior execution and solutions to their financing needs,” he says.

“Yes it’s been hard but as long as we’re delivering to the best of our capabilities, clients will continue to do business.”