One more time about Kazakhstan euronotes of the third issue - Euroweek

/IRBIS, Oct.14, 99, based on information of "Euroweek"/ - On October 1 "Euroweek" - a weekly issue devoted to international market of capitals - published an article "Kazakh blow-out reopens emerging dollar markets". In IRBIS analysts opinion, some conclusions of this review are of interest in terms assessment of the third issue of the republic's sovereign debt placement. We'll remind that the issue received ISIN XS0102764031 on the euromarket (Reg. S), code US486661AC56 in USA (Reg. 144A) and was placed for five years via ABN Amro and Deutsche Bank for $200 mln. Circulation will start on October 18. Euronotes have a coupon rate of 13.625% paid out semiannually, 13.946% APR, and spread 825 base points over Treasuries with issue price 98.87% and a wide range of offer between 800-825 base points. Deal was rated B1/B+/BB- in London and actually meant Kazakhstan's return to the Euromarket after a two year break. The issue became the first among CIS countries since before the Russian crisis in August 1998. Experts believe, that Kazakhstan's success became a boost to other emitters from emerging markets, which were barred from major dollar markets in 1999. Investors shied away from investing their money in eurobonds of emerging markets when Latin and Eastern Europe countries were drifting between crises. "We are pleased that Kazakhstan has been able to access the Euromarkets and demonstrate that single-B sovereigns still have access to international debt funding," said Peter Schikaneder, director of debt origination at Deutsche Bank in London. "We feel that Kazakhstan had a clear and credible credit story to tell and that investors have recognized that fact." Reid Payne, global head of emerging market syndicate at ABN Amro in London, said: "With this issue Kazakhstan has been able to successfully differentiate itself from most of its neighbors and to achieve a landmark financing in a marketplace characterized by a lack of depth and susceptibility to event risk news." He added: "Kazakhstan has capitalized on its strong economic fundamentals, based on healthy levels of foreign direct investment, responsible fiscal discipline and rising commodity prices." Relative to other comparable deals, issue of Kazakhstan gives 15 base points higher than Brazilian bonds (11.625% April 2004) trading at 810 bp over Treasuries. While Turkey had an 8.875% May 2003 deal and a 9.875% February 2005 transaction trading at 500bp and 600bp over Treasuries respectively. Syndicate members said that since both Brazil and Turkey are more frequent issuers with better established investor bases, it was appropriate that Kazakhstan should have paid a pick-up over their dollar offerings. Although on an historical basis the pricing on this week's issue was expensive for Kazakhstan, market participants said that the fact the country had been able to tap the Euromarkets at all was more significant than the relative cost. For the Kazakh authorities, the completion of this week's dollar issue represents a vote of confidence in economic management policies which have saved the country from the financial chaos afflicting most of the country's neighbors. It also marks a satisfying end to a protracted issuance process. It was mentioned earlier that lead-managers of the project tried to place bonds in "euro zone". However, these plans should not have to come true, since rising concerns over prospective debt defaults by the likes of Ecuador and Ukraine narrowed the potential investor base for lesser rated emerging market sovereigns. In September the leads decided to change funding officials on a roadshow to the US, where they proved successful in drumming up support for an institutionally targeted Euro/144A dollar issue. ABN and Deutsche, which distributed $180m or 90% of the transaction, reported that the vast majority of their bonds were placed with institutions in Europe and US - split roughly 60% and 40% respectively - but that there had also been some interest from Asian accounts. As well as demand from holders of Kazakhstan's previous dollar Eurobonds, the lead managers said the issue had also succeeded in attracting new investors. The leads are also confident of a continued strong secondary market performance based on the expectation that Kazakh pension funds, which are major holders of the country's $200m 9.25% three year offering from December 1996, will roll over their holdings into this week's new issue when that bond matures in December. The article given an information that Romania (rating B3/B-/B-) is currently preparing to launch EUR150-EUR200 mln three year euro issue via Deutsche Bank and Merrill Lynch. Unofficial price talk suggests that the euro issue will feature a 15% headline coupon and discounted issue price to give a yield in the region of 17%-18%. "Euroweek" informs that at Thursday's closing in London the issue of Kazakhstan euronotes were traded at 99.0/99.5% with 813/800 bp over Treasuries. IRBIS notes: according to ISMA, today on international market Kazakhstan eurobonds of the third issue are traded at 99.12/99.50%.