Kazakhstan considers issuing dollar bonds once again

Kazakhstan is contemplating issuing new bonds in dollars this October. The government plans to sell around $1.5 billion worth of bonds, marking the first such issuance since 2015, according to Bloomberg sources.

The details of the bond issue will depend on market conditions and the bonds may be denominated in euros. The country’s government last issued Eurobonds in 2019. Prior to that, in 2018, the Ministry of Finance placed a 10-year bond issue in euros, the first in a European currency after two decades of favoring the dollar. This shift was influenced by the European Central Bank’s more favorable monetary policy compared to that of the U.S. Federal Reserve.

Authorities are set to engage U.S.-based JPMorgan Chase & Co., Citigroup and Société Générale S.A. as underwriters. JPMorgan declined to comment, whereas Société Générale, Citigroup and Kazakhstan’s Ministry of Finance had not responded to inquiries by the time of publication, Bloomberg notes.

This move follows the resolution of a long-standing legal dispute over oil and gas assets. The dispute, which led to the freezing of $28 billion in sovereign assets in 2017, stemmed from Kazakhstan’s refusal to pay $500 million to the owners of Tristan Oil, Moldovan businessmen Anatol and Gabriel Stati. Although most of the assets have been unlocked, Astana acknowledged the potential risk of further lawsuits in its 2018 Eurobond prospectus.

According to the Ministry of Justice, the Kazakh government and representatives of Anatol and Gabriel Stati reached a confidential settlement in mid-July, bringing a 14-year dispute to an end.

In 1999, Tristan Oil Ltd, an offshore company owned by Anatol Stati, acquired stakes in two Kazakh oil companies, Tolkynneftegaz and Kazpolmunay. Through these companies, Stati managed the Borankol and Tolkyn fields in the Mangystau region.

In 2008, Stati was charged with violating Kazakhstan’s tax laws. The nation’s financial police claimed that the pipelines he owned were classified as trunk pipelines rather than field pipelines, which breached existing licenses. As a result of these unauthorized activities, it was alleged that the company executives had received over $293 million illegally. In 2010, Tolkynneftegaz and Kazpolmunay were placed under the trust management of KazMunayTengiz, a subsidiary of KazMunayGas.

After losing control of the companies, Stati filed a series of lawsuits across various jurisdictions, seeking the return of approximately $500 million that he claimed to have invested in Kazakhstan. All legal records related to Stati’s litigation with Kazakhstan are available on a dedicated website launched by the Ministry of Justice.

This spring, S&P Global Ratings affirmed its “BBB-” long-term sovereign credit rating for Kazakhstan, citing ongoing geopolitical uncertainty and lower oil prices as factors increasing the country’s gross external financing needs. Meanwhile, Fitch Ratings also affirmed Kazakhstan’s rating at “BBB” with a “stable” outlook.