Asian Development Bank issues first Azerbaijan manat bonds (UPDATE)

Finance Materials 20 January 2023 10:17 (UTC +04:00)
Kamran Gasimov
Kamran Gasimov
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Details added (first published: 09:26)

BAKU, Azerbaijan, January 20. The Asian Development Bank (ADB) has raised almost 8.4 million Azerbaijan manat (around $4.9 million) in its first bond issue, Trend reports via the bank.

The issue was structured as a currency-linked bond, denominated in Azerbaijan manat but settled in US dollars.

"The structure allows ADB to fully mitigate currency risks from its underlying project, and it opens access to a broader investor pool which is only required to mobilize dollars to subscribe to the bonds," said the bank.

According to the bank, the 2.5-year bond pays a fixed interest rate of 6 percent and is listed on the Luxembourg Stock Exchange. The bond was arranged by Goldman Sachs International and fully subscribed by Capitulum Asset Management GmbH.

"The proceeds of the bond issue will directly finance ADB’s Avrora COVID-19 Staple Food Supply Chain project. The project is providing essential liquidity support to Avrora LLC to sustain its operations and the livelihood of over 2,600 employees," said the bank.

The bank said that the project also supports gender inclusion and contributes to food security with the production and distribution of wheat and dairy products.

“This new bond issue in Azerbaijan manat builds on ADB’s strong momentum in local currency financing among Central Asian developing countries, with multiple borrowings and derivative trades already completed in Georgian lari, Kazakhstan tenge, and Uzbekistan sum,” ADB Treasurer Pierre Van Peteghem said.

“This deal helps us to implement our goal to access local yields in Azerbaijan with a sustainable use of proceeds by a transparent supranational issuer,” said Capitulum Senior Portfolio Manager Theodor Kirschner.

In addition, ADB’s local currency bond issues not only raise local currency funding to support loans to those borrowers unable to manage the currency risk associated with loans in dollars or euros but also contribute to capital market development.

The ADB is one of the country’s key sources of official development assistance. Current ADB operations in Azerbaijan are being implemented under the country partnership strategy 2019–2023, which aims to boost private sector development, raise public sector efficiency, improve infrastructure, and strengthen human capital. The strategy is closely aligned with the Government of Azerbaijan’s strategic road maps for the national economy and main economic sectors. As a chair of the Central Asia Regional Economic Cooperation Program in 2021, Azerbaijan actively supported the program’s agenda and hosted the virtual 20th Ministerial Conference.

To date, ADB has committed 65 public sector loans, grants, and technical assistance totaling $3.7 billion to Azerbaijan. Cumulative loan disbursements to Azerbaijan amount to $3.93 billion. These were financed by regular and concessional ordinary capital resources. ADB’s ongoing sovereign portfolio in Azerbaijan includes 2 loans and 1 sovereign guarantee worth $856.8 million.