Kazakh issuers list 13.8 billion yuan of bonds, led by sovereign Panda deal

Kazakhstan's Ministry of Finance, KazMunayGas (KMG) and the Development Bank of Kazakhstan (DBK) listed yuan-denominated bonds with a combined face value of CNY13.8 billion on the Astana International Exchange (AIX) in the first ten days of September, the exchange's third-quarter results release shows.

At the National Bank of Kazakhstan's 30 September rate the CNY13.8 billion is about $2.1 billion, a Data Desk calculation from the same issue sizes.

Three issuers, six tranches

The finance ministry's second Panda bond issue, listed on 10 September, raised RMB6.6 billion in two tranches, AIX said. RMB5 billion has a three-year tenor and a 1.82 per cent annual coupon, and RMB1.6 billion has a five-year tenor and a 1.95 per cent coupon. Kursiv reported on 7 September, citing an economist, that target yields were 1.8 per cent to 1.9 per cent for the three-year tranche and 1.9 per cent to 2.2 per cent for the five-year, and that the ministry's debut Panda issue in May raised CNY3.4 billion with a three-year maturity and a 1.9 per cent coupon.

The two state-linked issuers sold Dim Sum bonds, which are yuan securities issued outside mainland China:

• KMG, listed on 2 September (exchange release): CNY1.5 billion of five-year bonds with a 2.3 per cent coupon and a 2.45 per cent yield, and CNY2 billion of ten-year bonds with a 2.8 per cent coupon and a 2.98 per cent yield, KMG said.
• DBK, listed on 9 September (exchange release): CNY2 billion of five-year bonds with a 2.25 per cent coupon and CNY1.7 billion of ten-year bonds with a 2.75 per cent coupon, DBK reported. The bank said the securities are listed on AIX and the Hong Kong Stock Exchange.

Chinese and international banks led both Dim Sum offerings. KMG named BOC International, Bank of China (Hong Kong), China CITIC Bank International, ICBC (Asia) and Citi as joint global coordinators, with Halyk Finance as Kazakhstan lead manager, its release said. DBK's joint lead managers included Bank of China, China International Capital Corporation, Deutsche Bank, Guotai Junan International, Société Générale and BCC Invest, the bank said.

Demand and pricing

KMG said its order book closed on 26 August after peaking above CNY25 billion, more than seven times the offering size, which it described as the largest order book in the history of Dim Sum offerings by issuers outside China and Hong Kong. Moody's assigned the bonds a Baa1 rating, in line with KMG's own rating, and settlement was scheduled for 2 September, the company said. The proceeds will finance its investment programme.

DBK said demand also exceeded CNY25 billion, almost seven times the amount sold, and that pricing improved by 50 to 55 basis points from initial guidance. It said it achieved the lowest coupon among CNH issuers in Central Asia and that the proceeds will go to projects in non-resource sectors, the release said. On 28 September the bank also signed an agreement with China Construction Bank's Astana branch on financing of up to RMB2 billion, which it said sets preliminary terms for a credit line.

The coupons show a spread between the sovereign and the state-linked issuers. DBK's five-year coupon of 2.25 per cent is 30 basis points above the ministry's five-year coupon of 1.95 per cent, and KMG's 2.3 per cent is 35 basis points above it, a Data Desk calculation from the AIX, DBK and KMG figures. The comparison is approximate because the Panda bonds are sold in China's domestic market and the Dim Sum bonds offshore. The ministry's three-year coupon of 1.82 per cent is 8 basis points below the 1.9 per cent reported by Kursiv for its May issue.

At AIX, chief executive Assel Mukazhanova said in the exchange's release that the issues "demonstrate international investors' continued appetite for Kazakh sovereign and quasi-sovereign debt" and "pave the way for further corporate issuances".

More borrowing from China is planned

Finance Minister Madi Takiev said Kazakhstan could raise about $1.5 billion to $2 billion abroad next year and is focusing on China, with Panda bonds and possibly dollar Eurobonds planned, Kursiv reported on 14 October. Kursiv quoted him as saying the country issued $1.5 billion of Panda bonds this year at 1.82 per cent, a figure that applies to the three-year tranche of the second issue.