Despite the global market ructions stemming from Ukraine, bankers on the deal say Azerbaijan is set to push ahead with plans for its first international bond issue, which will be denominated in dollars. Meetings with investors start Monday in Europe, before officials head to the U.S. later in the week.
The frontier bond market has been quiet of late, after the splurge last year that brought borrowers such as Rwanda and Armenia to market for the first time. Months after it was originally supposed to hit the market, Kenya’s bumper dollar bond is still nowhere to be seen. But oil-and-gas rich Azerbaijan is undeterred.
Gross domestic product growth has run at a breakneck pace in Azerbaijan in recent years. Annual growth rates are now in single digits, but in 2006 the economy expanded at 34.5%. Fitch Ratings expects 2013 growth rate to come in around 5%, with a 17% current account surplus. The agency, which rates the country at BBB-, puts Azerbaijan’s government debt to GDP ratio at end 2013 at around 14%.
“Azerbaijan doesn’t really need money,” said Clemente Cappello, CEO at Sturgeon Capital, an investment boutique with a focus on Central Asia. But this bond will “let the country be known in the world” and provide a benchmark for other potential bond issues from the country, he said.
On pricing, investors looking for a reference can check The State Oil Company of the Azerbaijan Republic, or SOCAR. The company has two bonds, one maturing in 2017, one in 2023. Yields are around 3.4% for the 2017 paper, and 5.5% for the 2023. The bonds have been hardly moved by nasty recent developments in Ukraine, but did move in relation to wider emerging markets routs of the summer of 2013 and this January.
