Development Bank of Mongolia prices maiden bond issue
The Development Bank of Mongolia (DBM) on March 14 priced its inaugural international bond offering amounting to USD580 million, providing investors with further diversification into new asset class.
Mongolia’s only state-owned policy bank priced a Reg S five-year deal at par with a similar coupon and yield of 5.75 percent. The deal ended what had been a long wait for a Mongolian sovereign issue and created a benchmark and a yield curve for future transactions from the country’s banks and corporates. The bonds traded well in the secondary market, commencing trading at 101, before falling to 100.25. They recovered on March 16 and were trading at 100.5 in the afternoon, indicating that pricing was spot-on.
DBM held a roadshow a week before the pricing visiting Hong Kong and Singapore, and out of those investor meetings, it already garnered indication of interest which was enough to cover the entire book.
Mongolia’s only state-owned policy bank priced a Reg S five-year deal at par with a similar coupon and yield of 5.75 percent. The deal ended what had been a long wait for a Mongolian sovereign issue and created a benchmark and a yield curve for future transactions from the country’s banks and corporates. The bonds traded well in the secondary market, commencing trading at 101, before falling to 100.25. They recovered on March 16 and were trading at 100.5 in the afternoon, indicating that pricing was spot-on.
DBM held a roadshow a week before the pricing visiting Hong Kong and Singapore, and out of those investor meetings, it already garnered indication of interest which was enough to cover the entire book.
On March 12, Asia time, it went out with a price whisper of mid to high six percent, generating demand of USD3 billion.
Then on March 13, it went out with an initial price guidance of between six percent and 6.25 percent, and when London opened, it revised the guidance to between 5.75 percent and six percent. By that time, the order book has grown to USD6.25 billion from 320 investors. It also got an approval to upsize the offering from USD500 million to USD580 million, an unusual deal size that completed DBM’s USD600 million medium-term note (MTN) programme following a private placement of USD20 million.
“All investors viewed this deal as a sovereign deal, which the market has been waiting for,” says a banker familiar with the transaction. “The government of Mongolia has specifically set up the DBM as a vehicle for offshore borrowings to finance infrastructure projects, such as railways, roads, housing projects and industrial parks.”
Proceeds from the offering will be used largely to finance the construction of a railway connecting the Tavan Tolgoi coal deposits with the existing trans-Mongolian railway at Sainshand – the city where the government wants to build an industrial park. The rest of the amount will fund road construction and other projects.
DBM set up the MTN programme in November 2011, but made it clear that it would wait until the market was better before launching a transaction. The arrangers also recommended not to do a deal immediately and wait until the new year hoping the Greek issue would be resolved and investors were keen to book assets.
“This is a diversification play for all the sovereign and macro funds, and the deal attracted all the big global money managers,” the banker says. “Mongolia’s objective on this deal is two-fold: to secure a pricing inside six percent and to strike a relationship with the top global investment managers and those two objectives were achieved.”
The bonds were well-distributed across the regions, with 36 percent sold in Europe, and 32 percent each in Asia and the US. Fund and asset managers accounted for the bulk of the paper at 85 percent, while the remaining 12 percent was bought by private banks and three percent by other investors.
ING acted as the global coordinator for the transaction, as well as a joint bookrunner along with Deutsche Bank and HSBC.
Closely following DBM’s footsteps in the G3 bond market is Mongolia Mining Corporation, which is continuing its roadshow this week in London and the US, after visiting Asia last week. Bank of America Merrill Lynch, ING and J.P. Morgan are the joint bookrunners for the deal, with Standard Bank and Standard Chartered Bank acting as joint lead managers.
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Then on March 13, it went out with an initial price guidance of between six percent and 6.25 percent, and when London opened, it revised the guidance to between 5.75 percent and six percent. By that time, the order book has grown to USD6.25 billion from 320 investors. It also got an approval to upsize the offering from USD500 million to USD580 million, an unusual deal size that completed DBM’s USD600 million medium-term note (MTN) programme following a private placement of USD20 million.
“All investors viewed this deal as a sovereign deal, which the market has been waiting for,” says a banker familiar with the transaction. “The government of Mongolia has specifically set up the DBM as a vehicle for offshore borrowings to finance infrastructure projects, such as railways, roads, housing projects and industrial parks.”
Proceeds from the offering will be used largely to finance the construction of a railway connecting the Tavan Tolgoi coal deposits with the existing trans-Mongolian railway at Sainshand – the city where the government wants to build an industrial park. The rest of the amount will fund road construction and other projects.
DBM set up the MTN programme in November 2011, but made it clear that it would wait until the market was better before launching a transaction. The arrangers also recommended not to do a deal immediately and wait until the new year hoping the Greek issue would be resolved and investors were keen to book assets.
“This is a diversification play for all the sovereign and macro funds, and the deal attracted all the big global money managers,” the banker says. “Mongolia’s objective on this deal is two-fold: to secure a pricing inside six percent and to strike a relationship with the top global investment managers and those two objectives were achieved.”
The bonds were well-distributed across the regions, with 36 percent sold in Europe, and 32 percent each in Asia and the US. Fund and asset managers accounted for the bulk of the paper at 85 percent, while the remaining 12 percent was bought by private banks and three percent by other investors.
ING acted as the global coordinator for the transaction, as well as a joint bookrunner along with Deutsche Bank and HSBC.
Closely following DBM’s footsteps in the G3 bond market is Mongolia Mining Corporation, which is continuing its roadshow this week in London and the US, after visiting Asia last week. Bank of America Merrill Lynch, ING and J.P. Morgan are the joint bookrunners for the deal, with Standard Bank and Standard Chartered Bank acting as joint lead managers.
Contact The Asset
© Asset Publishing and Research Limited
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