This is Kazakhstan’s first foray into the international bond market since 2000, and the prospect of buying the sovereign’s debt has been eagerly anticipated, according to a syndicate banker away from the deal.
“This is a deal that people have been waiting for,” the banker said.
The closest comparable issuers that helped leads work out a fair price for Kazakhstan are the Azerbaijan sovereign (Baa3/BBB-/BBB-) and Kazakh state-owned oil and gas company KazMunaiGas (Baa3/BBB-), according to two syndicate bankers.
Azerbaijan’s bonds due 2024 were spotted trading at a Z-spread of 192bp on Monday morning, according to a deal lead, while Tradeweb had the notes quoted at plus 196bp.
Meanwhile, KazMunaiGas’s due 2021 notes were trading at a Z-spread of 243bp, while its longest dated bonds, due 2043, were trading at plus 307bp on Monday, according to Thomson Reuters data.
“[Kazakhstan’s] pricing looks sensible,” said the syndicate banker away from the deal.
Kazakhstan has not announced the size it is looking for yet, other than to confirm that each note will be of benchmark size. Among sovereign issuers this is assumed to mean US$500m, though Kazakhstan could easily take more, according to sources.
“If the deal is for around US$2bn, it will go well and they could get the price tighter,” the syndicate banker added.
Citigroup, HSBC and JP Morgan are arranging the 144A/Reg S deal, which is expected to price later on Monday. Kazakhstan held a series of investor meetings last week, which finished on Friday.
The sovereign is rated Baa2 with a positive outlook by Moody’s, BBB+ with a negative outlook by Standard & Poor’s and BBB+ with a stable outlook by Fitch Ratings.