Bloomberg News

Mongolia to Start Marketing Public, State-Backed Bonds March 8

March 05, 2012

The Development Bank of Mongolia LLC, a state-backed lender, will begin meeting with investors this week to offer dollar-denominated bonds in the country’s first public offering of government-guaranteed foreign debt.

The sale, part of the $600 million Euro Medium Term Note program the bank arranged with ING Groep NV last December, will start with a series of investor meetings on March 8, ING said today in a e-mailed statement. Deutsche Bank AG (DBK) and HSBC Holdings Plc (HSBA) have also been mandated to arrange meetings with investors for the sale, the statement said.

Mongolia is raising funds overseas to build rail and power projects and expand its main industry, mining. The nation’s economy expanded 17.3 percent last year, among the fastest in the world, as government spending in real terms doubled in the last two years, the World Bank said last month.

“The economy is entering another spring,” Prime Minister Sukhbaatar Batbold told the Mongolian Economic Forum on March 5. In the past two years, the country’s working population expanded the most in half a century, he said.

Mongolia overtook Australia in June as the biggest supplier of coking coal to China, with the mineral accounting for almost all its export growth last year, the World Bank said. China accounts for 80 percent of Mongolia’s exports.

A further increase in coal and iron ore exports to neighboring China won’t be possible without more rail lines and power plants, with most of Mongolia’s bulk commodities crossing the border by truck, according to Ulan Bator-based Trade and Development Bank, a corporate bank part-owned by Goldman Sachs Group Inc. (GS)

Funding Needs

The country will need as much as $68 billion by 2015 to invest in new mines, roads, houses, farming and social spending, Trade and Development Bank estimated in October. Domestic sources will probably account for less than 27 percent of that, with the majority coming from foreign direct investment and international capital markets, the bank said.

The Development Bank of Mongolia sold $20 million of one- year bonds to ING in December in a private placement. The bonds carried a 6 percent coupon and a 1 percent fee, the bank’s First Deputy Chief Executive Officer Bolormaa Luvsandorj said in December.

A medium-term note program simplifies the process for issuers seeking to sell overseas bonds as it provides one standardized document. It allows for a continuous sale of debt across currencies and at various times, as opposed to a single bond issue.

To contact the reporter on this story: Yuriy Humber in Ulan Bator at yhumber@bloomberg.net

To contact the editor responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net


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