Uzbekistan: Debut eurobond issue on the way

Uzbekistan (-/BB-/BB-) will hold an investor roadshow for its debut eurobond issue on 7-12 February. A US$-denominated benchmark five- and/or 10-year eurobond offering will follow, subject to market conditions.

It follows a long wait. Issuance plans have been mooted for some time, with media reporting a year ago on plans for US$200mn-300mn of bonds to be issued in 2018. At the time, it was reported that proceeds may be used to finance infrastructure projects and would set a benchmark for the private sector. It now looks like the size will be larger. S&P and Fitch assigned their first-time ratings in December 2018.

Uzbekistan (BB-) falls between Azerbaijan (BB+) and Belarus (B) in terms of rating notches. Another regional rating comp might be Tajikistan, although it is three notches lower, at B-. Tajikistan 27s trade at 8.7% (spread: 114bps to the equivalent US Treasury).
Outside the CIS, similar rating comps might be Vietnam (Ba3/BB-/BB) and Senegal (Ba3/B+/-). Vietnam 24s trade at 3.9% (spread: 127bps). Senegal 24s trade at 5.8% (spread: 320bps). Senegal 33s trade at 7% (spread: 419bps).

A new issue premium, scarcity factor, diversification potential and possible limited future supply might see relatively tight pricing, while lack of familiarity and institutional / governance factors could see wider pricing. Uzbekistan’s ratings are supported by low debt, modest twin deficits and high reserves. However, the country’s track record of reforms is limited, and its ability to manage significant foreign capital inflows and the political business cycle is untested. Much will depend on how the roadshow goes.

Below, we provide macro background on Uzbekistan, detail on the debt stock and information of the key comparable sovereign bonds.



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