Tajikistan enters bond markets with $500m deal

Tajikistan has raised $500m from its inaugural 10-year international bond, paying a fixed rate of 7.125 per cent in the latest evidence of keen investor appetite for relatively high-yielding sovereign debt from infrequent and new issuers.

The central Asian country, which has a population of 8.3m people, opened books on the deal on Thursday morning, initially offering an 8 per cent fixed coupon. The order book reached $4bn, resulting in a lower yield. 

Several new and infrequent issuers have sought to take advantage of the favourable debt-raising conditions in recent weeks, in a flurry of dealmaking by emerging and frontier economies.

Iraq raised $1bn with a five-year, 6.75 per cent bond last month, which was six times oversubscribed despite being its first bond without a US guarantee for more than a decade.

Earlier this summer Greece raised $3bn in its first sale of paper since its debt crisis at a yield of 4.625 per cent.

Belarus raised $1.4bn in a dual-maturity five- and 10-year tranche bond three months ago: the 10-year tranche carried a coupon of 7.625 per cent.

Ukraine is currently seeking investors for its inaugural dollar-denominated bond.

Tajikistan will use the proceeds of the debt sale to fund an ambitious $3.9bn power project.

The Rogun hydropower dam was originally a Soviet project in the 1970s when Tajikistan was part of the USSR but was never finished and has since seen talks with a series of potential investors fall through.

The dam would have an installed capacity of 3,600MW and be the tallest in the world, producing as much power as three nuclear plants, according to research by the Economist Intelligence Unit.

The bond issue increases Tajikistan’s external public debt from 35 per cent of GDP to nearly 50 per cent, the EIU estimates.

Tajikistan has a GDP per capita of just $804, according to the World Bank, and 43 per cent of its population work in agriculture. 

The small, mountainous country that borders Afghanistan and China is heavily dependent on remittances from oil workers who have found jobs in Russia; 45 per cent of its GDP comes from the payments they send back, according to the International Monetary Fund.

Late last year, the Tajik government launched a $490m bailout of some of the country’s largest banks as its economy suffered fallout from a recession in Russia and declining oil prices. The banking sector is still troubled, according to Maximilien Lambertson, central Asia analyst at the Economist Intelligence Unit.

“Tajikistan’s banking sector has been in crisis since the collapse in remittances from migrant workers in Russia in 2015-16,” he said.

Tajikistan is rated B3 by Moody’s and B minus by S&P; both give it a stable outlook.

Moody’s warned last week that the country has “weak” institutions and low foreign reserve levels but noted that “despite the severe stress in the banking system, the government and central bank have maintained relative economic stability”.

Citigroup and Raiffeisen Bank acted as bookrunners on the deal.

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