Monday, 24 September 2018

Kazakhstan kicks off long-awaited roadshow

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Kazakhstan is to begin meetings ahead of its much-anticipated return to the international bond markets.

The sovereign will kick off meetings in London before visiting investors in New York, Boston, San Francisco and finally Los Angeles through the course of week, ending the roadshow on October 3. A benchmark-sized US dollar 144A/Reg S bond will follow. Citigroup, HSBC and JP Morgan are the lead managers.

The sovereign was a regular in the market in the late 1990s but has not issued any new dollar debt since 2000, when S&P rated its at B+. It is now BBB+. The country, particularly its banking sector, was badly hit by the global financial crisis.

Many problems still need to be resolved, with rating agency Standard & Poor’s warning that “economy and industry risks remain very high in a global context” in a research note on the banking system published in September.

Still, with 1.8% of the world’s proven oil reserves according to analysts, average growth of 5.4% over the past five years and public debt at 12.5% of GDP, it’s not all bad.

With no outstanding debt, Kazakhstan is likely to be a rare instance of the sovereign pricing off a corporate benchmark, in this case KMG.

KMG 2020 notes are trading at a yield of 4.75% or Z-spread of 274bp. One analyst reckons should Kazakhstan “seek to issue at the 10-year level, 4.25% might be a good starting point, and at 30 years possibly 75-100bp more.”

Kazakhstan is not the only issuer on the road (though the pipeline is a little thin). National Bank of Oman is continuing investor meetings, while Seven Energy hopes to resurrect its aborted debut transaction.

The company is on the Asia leg of meetings, in Singapore, with Hong Kong scheduled for tomorrow (demonstrations permitting) before rounding things off in Switzerland on Wednesday.


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