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Capital Markets

Azerbaijan: Sovereign preparing debut Eurobond issue

Azerbaijan is set to become the latest sovereign from emerging Europe to tap the international bond markets, with a probable $300 million, five-year transaction slated for launch in September or October, market conditions permitting. The Caucasian republic has mandated Citi and Deutsche Bank to lead manage its debut transaction, which has been in the offing for several years. Gunduz Mammadov, chairman of the State Committee for Securities, says that the proceeds from the planned issue have been earmarked for general funding purposes. Deutsche Bank beat off competition from 11 other banks to book its berth on the landmark transaction and Citi was a shoo-in for the deal, having been a ratings adviser since 2005. Azerbaijan has a Ba1 issuer rating from Moody’s Investors Service and a BB+ grading from Fitch Ratings. The outlook on both ratings is stable.

Since 1995, in cooperation with the IMF, Azerbaijan has pursued a highly successful economic stabilization programme, which has resulted in inflation being slashed from 1,800% in 1994 to 8.3% at year-end 2006. Recently, however, inflationary pressures have re-emerged and the IMF warned last month that inflation could reach 20% by the end of this year unless the authorities in Baku take remedial action.

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