Hordes interested in MongoliaÆs first cross-border bond

Trade & Development Bank of Mongolia is set to launch the countryÆs cross-border debut.
MongoliaÆs first cross-border public bond offer is being marketed to investors this week. The Trade & Development Bank of Mongolia and its bankers, ING, kicked off the roadshow in Singapore on Monday, followed by Manila, Hong Kong and London today, with pricing expected by Tuesday at the latest.

The bank is MongoliaÆs biggest and oldest û a relic from the one-bank system of the Soviet days û that was taken over at the end of 2006 by Globull, a consortium of two smaller Mongolian banks and a mining company. It is raising funds for expansion into mortgage-lending and other long-term funding liabilities the domestic market cannot match through syndicated lending.

At first blush it may seem unexpected for a Mongolian bank to choose ING as the sole arranger and dealer for a G3 bond deal, but the two institutions have some history û ING has been providing managerial and technical assistance to TDBM for several years.

The three-year $60 million deal will be issued from a new $150 million euro medium-term note programme, another first for Mongolia, and is expected to list on the Singapore stock exchange. It is rated Ba2, which is two notches above MongoliaÆs sovereign rating.

Bankers trying to establish a price for the bonds have been groping in the darkáto some extent as there are no other Mongolian borrowers to compare against ûáand with the central bank yet to borrow in the international markets, there isnÆt even a sovereign benchmark. ôThe universe of CIS banks will provide the best comparables out there,ö says one banker, citing Kazak banks Alliance Bank, ATF and Bank Nur, all rated at Ba3.

ING has announced pricing guidance at 8.875% - 9.15% or about 415bp - 440bp over US treasuries. That compares favourably to the more-established Kazak banks, particularly if final pricing tightens further during the London meetings. ATFÆs due-November 2009 trades at 323bp over treasuries, Alliance BankÆs 2010 is at 390bp and Nur BankÆs 2011 is at 451bp.

Reports from the roadshow suggest that investors are showing substantial interest in the credit and have reportedly over-subscribed the number of bonds on offer by seven times, which could allow the bank to raise more than the $60 million currently on the table.

INGÆs Mongolian connections donÆt end at TDBM. It is also thought to be a frontrunner for MongoliaÆs sovereign debut û indeed, in September 2006, Ochirbat Chuluunbat, the governor of the Bank of Mongolia at the time, went so far as to name ING alongside Citigroup as the co-lead on a $300-500 million deal. However, the offer has so far failed to get off the ground, Chuluunbat is no longer governor at the central bank and even ING is unsure if itÆs still on the deal.

Clifford Chance and Arlex Consulting Services act as legal advisers to Trade & Development Bank. Allen & Overy and Anderson & Anderson represent ING.
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