Page 18 - Uzbekistan rising bne IntelliNews special report

18 I Special Report: Uzbekistan Rising bne December 2021
Debt maturity schedule
(as of the end of October), USD bn
UNG's debt and leverage
considering the company’s declared refinancing plans for raised proceeds.
The pricing of the debut UNG eurobonds, according to VTB, is likely to go through the prism of yield levels currently formed by Uzbekistan’s sovereign curve, which appear to
be the most suitable benchmark,
and additionally, the so far sole outstanding corporate bond out of Uzbekistan: UZAMTS 26 (YTM 5.2%) of UzAuto Motors (another of the country’s quasi-sovereign borrowers, rated a notch lower than UNG).
“With the current yield curve positioning of Uzbekistan and the country’s QSissues, we see UNG’s 5Y tenor bond pricing within the range of 3.9 – 4.4% (mid swaps + ~275 – 325bp), which suggests a ~50-100bp yield premium relative to Uzbekistan’s sovereign curve. That is mostly in line with the spread levels to sovereign at which other CIS O&G majors are currently trading,”
the investment bank concluded.
For UNG’s 10Y tranche bond, the estimate is 4.7-5.2% (mid swaps +~320-370bp).
According to a resolution of the government, the eurobond listing is set to take place by the end of this month.
and EUR (13%). The issuer’s average cost of debt was 3.61% as of YE20 (3.40% for the USD-denominated debt). UNG’s local debt maturity peaks in 2022 (~$1bn). According to the deal prospectus, the company intends to devote almost $0.6bn of the proceeds raised from the eurobond placement towards refinancing its current indebtedness, while the remainder
is to be used for general corporate purposes (including capex financing).
In late 2020, the Uzbek government included UNG in its privatisation programme, meaning that the company’s IPO could be on the table during the next few years. The state is considering selling up to 25% of UNG.
VTB said that it was not considering
a partial privatisation (with the state retaining control) as a negative credit development for UNG. The potentially lower government support for the company post-IPO could weaken the issuer’s credit profile and, to a certain extent, threaten its credit ratings.
UNG’s debut eurobonds are to be issued under English Law in the RegS and 144A formats, and rank as a senior unsecured obligation of the company. Based on the preliminary deal terms, there is the possibility of a double-tranche transaction (five and 10 years), while the total size of the offering is likely to exceed $0.6bn (VTB estimates it at up to $1bn),
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