The European Bank for Reconstruction of Development and the Asian Development Bank are set to become the first international lenders to sell bonds in the Azeri currency as the former Soviet nation seeks to boost its debt market.
Both banks have “actively” expressed interest in selling debt in manat after first considering the offerings two years ago, Rufat Aslanli, head of Azerbaijan’s State Committee for Securities, said in an interview in Baku on Thursday. Officials at the lenders this month separately said they intended to tap the Azeri market.
Renewed appetite for manat debt underscores government efforts to garner interest in local capital markets with a new securities law as the nation contends with lower oil prices and slower growth, which prompted the central bank to devalue the manat. The Caspian Sea country carries the lowest investment grade rating at Standard & Poor’s, Fitch Ratings Ltd. and Moody’s Investors Service.
“Our team has already started discussing legal and technical matters of the issuance with these institutions,” Aslanli said, referring to the bond sales, without elaborating on their size.
The EBRD and the ADB have each invested more than $1 billion in projects in Azerbaijan in the past two decades and are looking to reduce currency risks by selling bonds locally, according to Aslanli.
The largest oil producer in the former Soviet Union after Russia and Kazakhstan derives more than 40 percent of its gross domestic product from energy. Policy makers devalued the manat by about a third to 1.05 against the dollar on Feb. 21, citing the global oil rout. The currency is the world’s second-worst performer this year, data compiled by Bloomberg show.
The new capital-markets law is designed to reduce risks for over-the-counter market operations and to increase transparency, Aslanli said.
Azerbaijan, which plans to issue debt in euros in 2016, sold an inaugural 10-year note of $1.25 billion in March last year. The yield on the bond fell four basis points on Monday to 4.2 percent. A record $227 million in debt was raised by the government and companies in manat in 2014.