Kazakhstan’s KazAgro seeks consents to amend 3.255%, 4 5/8% notes

By Susanna Moon

Chicago, Feb. 22 – JSC KazAgro National Management Holding said it began a consent solicitation for its €600 million 3.255% notes due 2019 and its $1 billion 4 5/8% notes due 2023.

The company has scheduled noteholder meetings for March 23 in London.

The issuer is looking to make changes to the terms and conditions of each of series of notes due to depreciation of the Kazakh tenge caused by the “turbulence in the oil and gas markets and subsequent reduction in price of oil, compounded by a recession in Russia and weaker growth in China,” according to a company notice.

To address the issue of currency depreciation, the issuer is asking for more flexibility in its permitted debt covenants.

The company also is soliciting changes because of the release by the government of Kazakhstan of a comprehensive privatization plan that affects some of the issuer’s subsidiaries along with the implementation of the issuer’s own development strategy for the years 2011 to 2020, referred to as the corporate reorganization, the release added.

The issuer's reporting currency for the purposes of its financial statements is the tenge. As a result, liabilities incurred by the issuer and its subsidiaries in foreign currencies will increase when converted into the tenge and reflect the significant depreciation of the tenge against the dollar and the euro since August. To the extent that the issuer does not maintain matching foreign-currency assets, the total consolidated equity of the issuer will drop, the company noted.

The company said the group will be unable due to the constraints set out in its covenant package for the notes during 2016 and 2017 to raise enough foreign currency-denominated funds to allow it to provide financing to the agricultural sector and to carry out its mandate of supporting the development of the agricultural sector in Kazakhstan.

The issuer said that in the long term it will be able to reduce its exposure to non-tenge liabilities and to mitigate the effect of its ongoing exposure to foreign currencies. Beginning on Jan. 1, 2018 the company expects to have enough borrowing capacity to be able to fund its ongoing activities without the need to extend the permitted debt amendment beyond two years.

The covenant caps the ratio of the total consolidated assets of the issuer to its total consolidated equity at five times.

Specifically, the issuer is seeking noteholder approval to amend the definition of permitted debt to allow the issuer and any subsidiary to incur up to $750 million or its equivalent of additional debt during each financial year ending Dec. 31, 2016 and Dec. 31, 2017 even if the issuer's asset-to-equity ratio is more than 5 times.

The issuer also is asking to include some additional clarifying wording related to foreign exchange rates for incurrence and refinancing of debt.

The maximum amount of additional permitted debt for 2016 and 2017 is equal to $750 million less any debt incurred by the issuer or its subsidiaries in that year under the asset/equity ratio requirement. The maximum amount of additional permitted debt is consistent with the range of annual debt incurred by the issuer and its subsidiaries since 2013.

The early consent fee will be €10.00 for the 2019 notes and $15.00 for the 2023 notes. The late consent fee will be €2.50 for the 2019 notes and $3.75 for the 2023 notes.

The record date is March 14.

The early consent deadline is 5 p.m. ET on March 15.

The consent solicitation will end at noon ET on March 21, with settlement following on March 29.

The solicitation agent is UBS AG, London Branch (+44 0 20 7568 2133, 203 719-4210, 888 719-4210 or ol-liabilitymanagement-eu@ubs.com).

Lucid Issuer Services Ltd. (David Shilson / Paul Kamminga, +44 0 20 7704 0880 or kazagro@lucid-is.com) is the tabulation agent.

The notes were issued under the company’s $2 billion debt issuance program.

KazAgroFinance provides domestic agricultural producers with access to financing. The issuer is based in Astana, Kazakhstan.

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