Kazakhstan returns to eurobond market

Kazakhstan returns to eurobond market

Published: October 7, 2014

Sovereign raises 10- and 30-year debt tranches.

Kazakhstan has raised US$2.5bn of 10- and 30-year bonds. This is the country’s first trip to the eurobond market since 2000, when it raised US$350mn-worth of 7-year paper.

The 10-year debt tranche was worth US$1.5bn and priced with a coupon of 3.875%, while the US$1bn tranche came with a coupon of 4.875%. Citi, HSBC and JP Morgan handled the issuance.

Kazakhstan is the first country to issue bonds in accordance with a new regulatory framework drawn up by the International Capital Market Association (ICMA) last month. The ICMA, a self-regulating organisation that represents a broad range of capital market participants, has recommended a series of measures to prevent a repeat of the long and bitter restructuring seen after Argentina’s default in 2001.

While a majority of Argentina’s debt holders agreed to take a big haircut, a small number of holdouts went to a New York court and cited the pari passu contractual clause, which states that all bondholders should be treated equally, as justification for receiving full repayment. The holdouts won the case, Argentina refused to pay and the battle continues to rumble on.

The new, voluntary regulations that Kazakhstan is following include a collective action clause, which allows a majority of bondholders to agree to changes to bond terms which are then legally binding on all bondholders, whether they agree with the restructuring or not. They also include a more precise definition of the pari passu clause and when it can be applied, hopefully helping to avoid a repeat of the Argentina debacle.