On November 21, FMO, the Dutch Development Bank, issued the first ever offshore Tajik Somoni (TJS) linked bond.
This third frontier currency transaction executed under FMO’s Debt Issuance Program in 2016, follows earlier transactions in Zambian Kwacha and Kyrgyzstan Som. The deal was structured, arranged and distributed by ING. The Currency Exchange Fund (TCX) provided a hedge to FMO.
The repeat issuance of a local currency linked bond again reflects FMO’s strategy to promote financing in frontier currencies. Tajikistan is a country where FMO is pursuing opportunities to provide more local currency loans and increase the impact of our lending business in supporting the private sector. Customers are microfinance institutions as well banks and funds servicing the market for small and medium-sized enterprises. 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 TJS. TCX, one of the very few swap providers for long dated TJS provided a hedge for the bond issue. The lack of an established swap market creates difficulties for hedging local currency loans in frontier markets such as Tajikistan. This is sometimes a constraint for the amount of lending FMO can provide to clients. By issuing this TJS linked bond and hedging the cash flows with TCX, FMO facilitates the creation of additional capacity for TJS linked lending and hedging.
The cash flows of this TJS linked bond are calculated in TJS and settled in USD. The TJS linked bond has a maturity of 3 years, a fixed rate coupon of 10.7% and a notional of USD 5 million, which is equivalent to TJS 39,384,500. The bond will be listed in Luxembourg.
