Mongolia says bank bondholders will be repaid in full

Development Bank of Mongolia bondholders can expect their debts to be repaid in full when they fall due next year, a senior finance official said yesterday, even as the state-backed bonds traded below par just three months before maturity. The International Monetary Fund is predicting zero growth this year for Mongolia’s once promising economy, as a result of years of declining foreign investment, slower growth in China, and a softer market for its abundant coal resources.

The country pinned between China and Russia is reeling from a balance of payments crisis and a tumbling tugrik currency that the present government has blamed on mismanagement by the prior administration. On Friday, Mongolian finance ministry officials held talks with groups such as the IMF and World Bank to present their plan to buoy the economy. Deputy Finance Minister Khurelbaatar Bulgantuya told a news conference following the talks that Mongolia hoped to work with partners to refinance $580 million in sovereign-backed debt from the Development Bank of Mongolia due in 2017.

The government could lighten its burden on interest on loans with new “soft” loans that offer easier terms and lower interest for repayment, she said. Renegotiating its debt for a smaller repayment on the principal, known as a haircut, “would be the last resort,” she said. “With the IMF, we’re looking to refinance.” The Development Bank bonds yesterday were trading below par at 97 - just months away from the redemption date in March 2017. “The correction was triggered by President-elect (Donald) Trump’s expected protectionist policies and frontier market outflows. The coupon is low and the price fall brings the yield in line with fair value,” said a Hong Kong based credit analyst, requesting anonymity because he is not authorized to speak to the media. — Reuters