EM CEEMEA CREDIT: Silk Road Group USD 5NC2 - FV
(-/B1/BB-)
IPT: 8%A
FV: 7.5%
- Silk Road Group launching a USD5NC2 bond. Silk Road Group is an investment holding company in Republic of Georgia (Ba2neg/BB/BBneg) with the main asset being Silknet (no.2 telecoms provider in Georgia). Republic of Georgia only has one short-dated USD bond outstanding 2.75% Apr26 at around 6.3% yield so not worth referencing. Georgia Global Utilities (CGEON: -/BB-pos/BB-pos) has a 8.875% Jul29 bond which is around 6.98% yield or z+365bp. Georgian Railway (GRAIL: -/BB-/BB-) has a 4% Jun28 secured bond which is around 7.23% yield or z+400bp. For completeness we also look at Turk Telekom (TURKTI: -BB/BB-) 7.375% May29 yield 6.3% and z+298bp although we acknowledge it’s not directly comparable. Adjusting for rating maturity we estimate a FV on the new bonds at 7.5% yield or z+435bp.
- Silk Road Group is the holding company for Silknet, which is the second largest telecom company in Georgia. Silk road group also operates five hotels (three under Radisson brand), two casinos and is developing two real estate projects Silk Towers in Batumi and Sakanela in Tbilisi.
- Silknet contributes >65% of revenues and 85% of cash flow (Moody’s) and 90% of EBITDA to the group. Telecoms market in Georgia is small and highly concentrated, 5.8mn mobile and 1.2mn internet retail customers. Silknet’s market share in mobile as a % of revenue was 35% and 34% in fixed retail broadband (according to the regulator). Silk net managed to get sizable 5G spectrum in Jun 25, which puts its competitive position in line with competitors.
- Moody’s expects adj. leverage at 2.8x at the end of Dec 25 reducing to 2.6x by 2027. However, in the short term the agency expects FCF to remain negative after shareholder distribution.
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AUSSIE 10-YEAR TECHS: (U5) Recovers With Treasuries
- RES 3: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 2: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 1: 95.960 - High Apr 7
- PRICE: 95.710 @ 14:34 BST Aug 8
- SUP 1: 95.415/95.300 - Low May 15 / Low Jan 14
- SUP 2: 95.275 - Low Nov 14 (cont) and a key support
- SUP 3: 94.707 - 1.0% 10-dma envelope
Aussie 10-yr futures received a boost from the US Treasury rally that followed a poor NFP print. This keeps Aussie 10-year futures toward the top end of the recent range. To the upside, next resistance is at 96.207, a Fibonacci retracement point. Next support undercuts at 95.420 (pierced), the Feb 13 low, ahead of 95.275, the Nov 14 low and a key support. Clearance of this level would strengthen a bearish condition.
SECURITY: Trump To Sign Trilateral Peace Accord With Armenia/Azerbaijan Shortly
US President Donald Trump is shortly due to sign a trilateral peace agreement with Armenian Prime Minister Nikol Pashinyan and Azerbaijani President Ilham Aliyev at the White House. LIVESTREAM The event will provide another opportunity for Trump to style himself as peacemaker, after touting success in brokering peace deals between Rwanda/Congo, Cambodia/Thailand, and India/Pakistan.
- The accord aims to resolve a decade-long dispute over the sovereignty of Nagorno-Karabakh - a breakaway Azerbaijani province that was under de facto Armenian control from the dissolution of the Soviet Union until a 2020 war.
- Trump described the meeting on Truth Social as a “historic peace summit,” noting that the US will also sign “Bilateral Agreements [to] fully unlock the potential of the South Caucasus Region.”
- White House spokeswoman Anna Kelly told reporters that Trump would sign deals with both Armenia and Azerbaijan on energy, technology, economic cooperation, border security, infrastructure and trade.
- A White House official said: "It's about the entire region, and [the leaders] know that that region is known to be safer and more prosperous with President Trump."
- Reuters reports that the US will have development rights to build transportation links in the strategic Zangezur Corridor, a mountainous stretch of Armenian territory between Azerbaijan and its Nakhichevan exclave.
- Politico notes: “But whether this is just a photo opportunity or a lasting end to a conflict that has undermined stability in a region dominated by Russia and Iran will depend on whether the US can address several key challenges.”
FED: Balance Sheet Runoff Continues At Steady $20B/Month Pace (2/2)
Fed asset holdings were little changed in the past week. SOMA runoff totaled $2.8B (composed of $4.2B less nominal Tsy holdings and $1.4B more TIPS), with emergency lending/liquidity facilities $0.7B lower.
- Over the last 4 weeks, the $20B/monthly expected QT pace was roughly adhered to: MBS fell $18B, with Treasury net holdings down around $2B (a fall in TIPS holdings offsetting a slight rise in nominals).
- Discount window usage accounted for the fall in lending facility usage this week; takeup is now down to $4.9B, down $1.3B in the last month and down from the 1-year high of $6.4B set in July which looks to have been a temporary blip higher.
