ASTANA, KAZAKHSTAN - The Asian Development Bank has priced its debut Kazakhstan Tenge bond in the international capital markets. The issue has a principal amount of 6 billion Kazakhstan Tenge (about US$49 million equivalent).
Proceeds of the bond issue will be used to fund ADB's private sector banking activities in Kazakhstan. ADB expects to increase its local currency lending in Kazakhstan in the future and issuance of bonds will be its key funding approach. Such local currency bond issues are expected to fund ADB's nonsovereign lending operations in the country for both infrastucture and finance sectors.
As demand for long-term infrastructure financing is increasing in Kazakhstan, ADB's objective is to meet these requirements with long-term local currency loans with fixed interest rates to eliminate currency and interest rate risks.
"This bond issue will assist in developing a long-term yield curve in Kazakhstan by providing a pricing reference for international triple-A rated issuers in Kazakhstan Tenge" says ADB Treasurer Mikio Kashiwagi. "It accentuates ADB's confidence in the Kazakhstan economy and we are very grateful for the support of the Kazakhstan authorities in making this transaction possible."
The 6 billion Kazakhstan Tenge issue has a maturity of 5 years, and an amortizing principal repayment structure. Priced at 100%, ADB's Kazakhstan Tenge bonds have a coupon of 6.80% per annum. The issue is settled in US dollars at the reference rate as at the time of pricing. Future payments of coupon and principal will be paid in US dollars at the reference rate set two business days prior to the respective payment date.
This settlement arrangement facilitates the process for international investors to invest in Kazakhstan Tenge denominated bonds. JPMorgan was the sole lead manager and bookrunner, and the issue was distributed to institutional investors looking for high-quality exposure to the Kazakh Tenge market. It is anticipated that subsequent issues will attract local investor interest.
ADB's Kazakhstan Tenge bond issue represents many firsts in the Kazakhstan Tenge market: first issue by a supranational institution, first issue rated triple-A by Fitch Ratings, Moody's and Standard and Poors, and first Kazakhstan Tenge issue in the international capital markets, listed on the Luxembourg Stock Exchange.
Stephen Wermert, Country Director of the ADB Kazakhstan Resident Mission adds that "ADB is particularly pleased to have been provided with the opportunity to become the first supranational issuer of Kazakhstan Tenge bonds. This will assist us in our strategy to provide long-term financing without currency risk to projects in the country."
Since early 2004, ADB has issued local currency bond issues in Hong Kong, China; India; Malaysia; People's Republic of China; the Philippines; Singapore; and Thailand. These issues allow investors to get exposure to ADB's triple-A credit in regional currencies. Most recently, ADB has also launched the Asian Currency Note Programme which allows issuance off a standardized documentation platform in different Asian currencies.
John Lee-Tin, Vice President, Debt Capital Markets Origination, JPMorgan, expressed his delight at the launch. "This debut issuance by the Asian Development Bank represents a great step forward in the KZT market. This bond reinforces the supranational's reputation for developing capital markets, particularly within its own constituency. With this issuance, the ADB has provided the market a high-quality reference point which will only help to attract more investor attention to this currency and bond market. JPMorgan is thrilled to be associated with this transaction."