DBM bond oversubscribed 8 times over
Development Bank of Mongolia (DBM) announced that it successfully issued a 500 million USD bond offering on October 17 that was oversubscribed eight times over.
After a five year absence on the international debt capital markets, DBM transacted a 500 million USD bond offering, receiving orders for 4.1 billion USD. This represented an oversubscription eight times over, which was even more noteworthy as the bond was the first offering by DBM without a government guarantee. The bank said that the successful offering is important in setting a price reference for other Mongolian borrowers.
The five-year bond has an interest rate of 7.25 percent and will be used to refinance existing short-dated and floating rate debt with the objective to manage assets and liability mismatches by extending duration, eliminating interest rate risk and reducing cost on a duration-adjusted basis.
“The bond was priced at a spread of only 85 basis points over the interpolated government of Mongolia curve. This compares very favorably to the most recent bank deal from Mongolia which, despite being guaranteed by the government, paid a spread of 280 basis points over the sovereign curve. The transaction garnered a high quality order book with a ‘who is who’ of international asset and investment managers participating by submitting orders for 4.1 billion USD of bonds, representing an eight times oversubscription. The oversubscription allowed for a final pricing of 75 basis points inside the initial guidance, a strong achievement against an extremely volatile market backdrop,” DBM said in a statement.
DBM said it conducted a comprehensive marketing campaign in the lead up to the offering. The campaign was aimed at fixed income investors in Hong Kong, Singapore, London, Boston, and New York.
“Its success demonstrates the strong perception the Mongolian sovereign and DBM have built with the global investor base over the past few years, as the nation's macroeconomic indicators have rebounded strongly, and a recapitalized DBM has embarked on a profitable and sustainable path, playing an ever more pivotal role in the ongoing diversification of Mongolia's economy, green industries and Mongolia's thriving export sectors,” DBM added.