Mongolian milk producer issues country's largest-ever corporate bond

Mongolian Mining

29/06/2017 10:04

ULAANBAATAR, June 29 (Reuters) - A Mongolian dairy producer 
has issued the local stock exchange's largest ever corporate 
bond, testing market appetite following an economic bailout and 
the potential election of an unpredictable new president. 
    Suu  SUU.MNE , which means milk in Mongolian, sold 6 billion 
tugrik ($2.55 million) of debt as it aims to boost production 
and refinance dollar-denominated debt accumulated during the 
country's short-lived economic boom. The one-year bills have an 
annual interest rate of 17.5 percent. 
    Investors were drawn to the bond because of the stability 
brought to the local currency, the tugrik, following a $5.5 
billion rescue package from the International Monetary Fund 
(IMF), said Dashdorj Bilguun, who worked on the underwriting at 
Golomt Capital. 
    "It stabilises the currency," said Bilguun of the IMF deal. 
    The tugrik was in free fall last year, declining by nearly a 
quarter as a result of falling investment and weak Chinese 
demand for commodities. 
    Coal and copper sold to China were leading drivers of 
Mongolian growth, but the IMF is now encouraging the landlocked 
Asian nation to diversify and develop agriculture and tourism in 
order to protect it from boom-bust cycles.  
    Suu is eyeing China as a potential customer for its dairy 
products, but Mongolian agriculture remains underdeveloped  
because of a lack of infrastructure and the remote location of 
herders.  
    About 30 percent of Mongolia's population still practices a 
traditional nomadic livelihood that can be traced back to the 
13th century, when Genghis Khan was building history's largest 
empire. 
    Bilguun said the bills were 12.6 percent oversubscribed 
despite investor concerns about the potential victory of 
presidential candidate Khaltmaa Battulga from the opposition 
Democratic Party, who won the most votes in an inconclusive 
first round of elections this week.  urn:newsml:reuters.com:*:nL3N1JO319  
    Before the election, Battulga was calling for more state 
control in mining, including the Oyu Tolgoi copper-gold mine run 
by Rio Tinto  RIO.AX  RIO.L .  urn:newsml:reuters.com:*:nL3N1J52NW 
    Shares in Mongolia-based firms plunged this week after the 
election, with Turquoise Hill Resources  TRQ.TO  and Aspire 
Mining  AKM.AX  falling by around 5 percent and the Mongolian 
Mining Corp  0975.HK  losing 14 percent since Monday. 
    An analyst with a Hong Kong investment firm familiar with 
Thursday's bond deal said the government had turned a corner 
after the IMF agreement was secured.  
    "The atmosphere has changed," said the analyst, who asked 
not to be named because he was not authorised to speak to the 
media. "There will still be pains, but hopefully the worst has 
passed."  
 
 (Reporting by Terrence Edwards; Editing by Amrutha Gayathri) 
 ((david.stanway@thomsonreuters.com; +86 21 6104 1799; Reuters 
Messaging: david.stanway.thomsonreuters.com@reuters.net)) 
 
Keywords: MONGOLIA BONDS/