Page 24 - bne magazine March 2017 issue

24 I Companies & Markets bne March 2017
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“The situation around Kazakh Eurobonds could be described as complicated, because after a switch to a free-floating exchange rate that depreciated the value of the tenge, the costs of servicing debt in foreign currency have increased,” Stanislav Chuyev, debt analyst at the Almaty-based investment bank Halyk Finance, tells bne IntelliNews.
In response to falling oil prices and the rapidly weakening currency of the country’s main trading partner Russia, the Kazakh authorities abandoned a policy to maintain the
“Kazakh companies have not rushed to raise debt, because the economic conditions in Kazakhstan and elsewhere in the region continued to deteriorate”
tenge’s exchange rate within a trading corridor and allowed the national currency to float freely in August 2015. As a result, the tenge’s value dropped from about KZT188 to
the dollar in August 2015 to a historical low of KZT384 in January 2016, but has since strengthened to about KZT332 to the dollar.
Even though KazMunayGas earns hard currency by exporting its oil, the move to buy out its Eurobonds was announced after the company secured $4.7bn for half of its 16.81% stake in the embattled giant offshore Kashagan field, which it sold to its parent Samruk-Kazyna sovereign wealth fund.
Yet despite the return of the sovereign to the international markets and the help this has afforded the corporate bonds already out there and their issuers, Kazakh companies have not rushed to raise debt, because the economic conditions in Kazakhstan and elsewhere in the region continued to deteriorate.
Since the launch of the sovereign issue in 2014, just three Kazakh companies raised debt in the immediate aftermath: KazMunayGas issued $500mn of 10-year notes with a coupon of 4.875% and $500mn of 30-year debt with a coupon of
6% on the LSE; Forte Bank issued $236.57mn of 10-year notes with a coupon of 11.75% on the Luxembourg Bourse; and Eurasian Bank raised $500mn of 10-year debt with a coupon of 7.5% on the Kazakhstan Stock Exchange.
“Prospects for issuing new debt fully depends on the situation in commodities markets – the current projects of [extractive] companies have been funded sufficiently at the moment and in case of need the state has offered aid, but new major projects will be subject to pressure from low prices of oil, metals and so on,” Chuyev of Halyk Finance concludes.
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