On August 26th FMO, the Dutch Development Bank, successfully issued its inaugural offshore Kyrgyzstan Som (KGS) linked bond.
This was the second local currency transaction executed under FMO’s recently updated Debt Issuance Program, following a transaction in Zambian Kwacha in July 2016. The deal was structured, arranged and distributed by ING. The Currency Exchange Fund (TCX) provided a hedge to FMO.
This issuance perfectly fits FMO’s strategy to promote local currency business. Kyrgyzstan is an important country where FMO supports the private sector with local currency loans. This sustains FMO’s mission to help entrepreneurs build a better world. With this bond issuance FMO acts as a catalyser for increased lending in KGS. FMO is actively pursuing opportunities to provide more local currency loans and increase the impact of our lending business in Kyrgyzstan.
TCX, one of the very few swap providers for long dated KGS provided a hedge for the bond issue. The lack of an established swap market creates difficulties for hedging local currency loans in Kyrgyzstan. This is sometimes a constraint for the amount of lending FMO can provide to clients. By issuing this KGS linked bond and hedging the cash flows with TCX, FMO facilitates the creation of additional capacity for KGS linked lending and hedging.
The cash flows of this KGS linked bond are calculated in KGS and settled in USD. The KGS linked bond has a maturity of 3 years, a floating rate coupon linked to the KGS and a notional of USD 5 million, which is equivalent to KGS 343,237,500. The bond will be listed in Luxembourg.
