Development Bank of Mongolia successfully returns to international debt capital markets

2018-10-18 17:06:53

Ulaanbaatar /MONTSAME/ After a five year absence the Development Bank of Mongolia (DBM) returned to the international debt capital markets with a highly successful USD 500 million benchmark offering on October 17. This was the first time DBM transacted a bond offering without a government guarantee, thereby setting an important price reference for other Mongolian borrowers.

The 5-year Reg S / 144A notes carry a coupon of 7.25 percent and were priced at a spread of only 85 basis points over the interpolated Government of Mongolia curve. This compares very favourably to the most recent bank deal from Mongolia which, despite being guaranteed by the Government, paid a spread of 280 basis points over the sovereign curve. The transaction garnered a high quality order book with a "who is who" of international asset and investment managers participating by submitting orders for USD 4.1 billion of bonds, representing an eight times oversubscription. The oversubscription allowed for a final pricing of 75 basis points inside the initial guidance, a strong achievement against an extremely volatile market backdrop.

Proceeds are being used to refinance existing short-dated and floating rate debt with the objective to manage assets and liability mismatches by extending duration, eliminating interest rate risk and reducing cost on a duration-adjusted basis.

DBM's transaction followed on the back of a comprehensive marketing campaign with fixed income investors in Hong Kong, Singapore, London, Boston and New York. Its success demonstrates the strong perception the Mongolian sovereign and DBM have built with the global investor base over the past few years, as the nation's macroeconomic indicators have rebounded strongly, and a recapitalised DBM has embarked on a profitable and sustainable path, playing an ever more pivotal role in the ongoing diversification of Mongolia's economy, green industries and Mongolia's thriving export sectors.