Mongolian US$350 million bond issue enhances country’s reputation among investors

ULAAN BAATAR, Mongolia, Dec. 1, 2023 /PRNewswire/ — On November 28, Mongolia priced a debt management exercise, funding a tender and the redemption of the US$392.6 million bonds maturity in March 2024. The objectives of the transaction were to (i) address near-term maturities, (ii) extend the duration of the nation’s debt stock; (iii) reduce cost; (iv) further Mongolia’s presence as a savvy issuer in the international debt capital markets.

During an extensive international roadshow the delegation of the Ministry of Finance and Bank of Mongolia spoke with over 100 global investors from Singapore, Hong Kong, the Middle East, London, continental Europe and the United States. The meetings were used to communicate key infrastructure project developments to drive Mongolia’s future, policies to preserve macroeconomic and external stability, Mongolia’s debt management and the Vision 2050, Mongolia’s path towards a diversified and sustainable economy.

The new US$350 million 7.875% due 2029 bond issue and tender achieved all stated objectives, reducing annual interest costs by more than US$3 million, and funding Mongolia’s international bond obligations until the next maturity in April 2026. The new bonds met with extremely strong investor demand with the order book reaching US$4.2billion at the peak and 293 investors participating. The 12-times oversubscription of the orderbook allowed for a pricing flat to secondary market yields of Mongolia without any new issue premium. 22% of participating investors are domiciled in the United States, 32% in Europe and Middle East, and 46% in Asia.

Mr. Javkhlan Bold, Minister of Finance said that, “During challenging times which brought Covid, border closures, rate hikes, inflation and geopolitical conflicts, our country managed to successfully address all near-term maturities via three deals, in 2021, earlier this year and with this transaction. Indeed, Mongolia emerged from the Covid crisis stronger. Economic conditions have stabilized on the back of strong export-led growth. The opening of the world-class Oyu Tolgoi underground copper mine and the construction of several heavy-duty railways to China will help increase our export volumes and transportation efficiency. This highly successful transaction highlights Mongolia’s recognition as a reliable and trustworthy issuer with global fixed income investors. Global fixed income investors recognized the efforts made, once again confirming Mongolia’s status as a prudent and reliable issuer.”

The transaction set new records for Mongolia in terms of its 13.7 times oversubscription and a record low spread of only 260 basis points against benchmark US Fed Fund rates. This follows the record of the 2021 transaction which secured Mongolia the lowest coupon ever for a single-B rated sovereign issuer.

Enhancing Mongolia’s reputation with global fixed income investors will also open the door and provide a platform to communicate opportunities for foreign direct investment to diversify the economy such as our agricultural sector and tourism industry. Efforts are being made to reduce Mongolia’s energy independence, to increase our hydroelectric power generation. Mongolia also has a huge 2.6 Terawatt potential for renewables. Foreign investment will help Mongolia utilize this potential to meet climate goals and for a better planet.

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