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UPDATE 2-Kazakhs eye return to debt markets with $1 bln in bonds
January 29, 2013 / 5:07 AM / 5 years ago

UPDATE 2-Kazakhs eye return to debt markets with $1 bln in bonds

* Government seeks cheaper cash to finance budget deficit

* Planned Eurobonds to set benchmark for state companies

* Kazakh BBB+ rating by Fitch notch higher than Russia’s (Adds quotes, government debt data, details)

By Raushan Nurshayeva

ASTANA, Jan 29 (Reuters) - Kazakhstan is planning a comeback to international debt markets by issuing 150 billion tenge ($996 million) of sovereign Eurobonds in the first half of 2013, Finance Minister Bolat Zhamishev said on Tuesday.

The planned move is aimed at taking advantage of low international interest rates to help bridge the country’s fiscal gap, Zhamishev told a cabinet meeting.

The oil-rich country, Central Asia’s largest economy, last issued sovereign Eurobonds in 2000. That paper, worth $350 million, was redeemed in 2007.

“Taking into account low interest rates (on external markets) and the country’s stable macroeconomic situation, we consider it possible to launch sovereign Eurobonds in the first half of 2013 to finance the budget deficit and set a benchmark for Kazakh issuers,” Zhamishev told the meeting.

He said the bonds would have maturity of five years, and it would take eight weeks to prepare the legal framework for the issue.

The cabinet swiftly voted to approve the plan.

Zhamishev said state-controlled companies would borrow abroad later in 2013 to refinance their Eurobonds. He gave no further details.

Kazakhstan’s 2013 budget envisages a fiscal gap of 785 billion tenge, or 2.1 percent of its gross domestic product.

With the planned issue of a 150-billion-tenge Eurobond, the external debt of the government would comprise 879.3 billion tenge ($5.8 billion), or 24.2 percent of the total portfolio of government borrowings, official data show.

The widening of the fiscal gap by 203.5 billion tenge in the second half of last year boosted yields on government securities issued on the domestic market, the government said on Tuesday, when explaining the reasons for new borrowing abroad.

It said the rising yields would significantly increase the cost of debt servicing, given the total volume of government securities in circulation of 2.897 trillion tenge ($19.2 billion).

“The indicative cost of borrowing on external capital markets was 2.01 percent as of Jan. 22,” the government said. “For comparison, the current rate on five-year government securities on the internal market is 5.5 percent.”

Ratings agency Fitch raised its view of Kazakhstan’s credit profile on Nov. 20 in recognition of the country’s sovereign balance sheet and initial efforts to cleanse bad debts from its banking system.

The BBB+ long-term foreign currency issuer rating, with a stable outlook, pushed Kazakhstan firmly into investment grade territory and a notch above Russia, its close political and economic ally.

The economy of Kazakhstan, the second-largest post-Soviet oil producer after Russia, expanded by 5.0 percent last year after a 7.5 percent rise in GDP in 2011. The central bank expects GDP to grow by 5-6 percent in 2013.

The vast steppe nation of 17 million, which is also an important producer and exporter of uranium, industrial metals and grain, had planned to return to foreign debt markets in 2010 to borrow between $500 and $700 million.

However, a $1 billion loan received from the World Bank at that time put these plans on hold.

$1=150.81 tenge (Reporting by Raushan Nurshayeva; Additional reporting by Mariya Gordeyeva and Dmitry Solovyov in Almaty; Writing by Dmitry Solovyov; Editing by Mohammad Zargham and David Brunnstrom)

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