Source: Bloomberg                        Date: 18 May, 2011

The sale to raise USD700 million in MNT-denominated bonds due in five, 10, and 15 years will begin this month and last in several phases around September. Mr. Ch. Khashchuluun, Chairman of the Development Bank of Mongolia, has said they will have another meeting with investors “in a week or two to make more concrete plans” to set terms for the initial sale. The Central Bank and the Finance Ministry are involved in “extensive consultations” on the sales, he said.

The bonds will be offered via the stock exchange and the Central Bank, with a private placement also possible, Mr. Khashchuluun said. The size of the offering may be adjusted to reflect market demand and also bring in a wide range of investors with the number of sales not yet decided, he said. Domestic banks and international investors have shown interest in the debt and yields are being discussed.

Moody’s Investors Service rates Mongolian sovereign debt B1, four levels below investment grade, while Standard & Poor’s rates it BB-, three levels below investment grade. Moody’s rates Mongolia the same as Sri Lanka, which sold 10-year bonds to yield 6.25 percent in September last year.

“The bank’s lending can’t be very costly, because it is policy-based financing,” Mr. Khashchuluun said. However, rates have to be high enough to attract investors, he said, “so it demands a balance.”

The Government has tasked the Development Bank of Mongolia, which opened last week, to help finance rail, road and other infrastructure projects as well as the building of an industrial park. The bank is in a hurry to start the sales so that it can access funding before construction stops due to freezing temperatures in the winter months, Mr. Khashchuluun said. Lack of infrastructure is holding back economic development across the economy, he said.