Testing investors' patience is a risky strategy
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Testing investors' patience is a risky strategy

MUYNAQ, UZBEKISTAN - APRIL 22, 2018: Building of Agrobank in former port town Moynaq Mo ynoq or Muynak , Uzbekistan

Agrobank has clearly paid attention to investor feedback since the summer but in stalling its new issue it risks losing its audience

It used to be the case that investors would gladly stick the boot into any issuer and its syndicate of banks that took up their precious time with a roadshow but then failed to bring the deal in the immediate aftermath. As the market has matured — and funding conditions have toughened — the buy-side has mellowed and accepted that charging into a bad market with a deal is not always the best option. Uzbekistan's Agrobank may be testing its patience, however.

Agrobank drew attention early in the summer when it first mandated BTIG as a sole lead for its deal. Investors at the time criticisedthe note for its lack of a credit rating and its structure — a loan participation note. But most of all they were concerned about the appointment of a bank with little track record in the CEEMEA bond business to sell it with no big international bond houses alongside it. The note was not printed.

When it re-emerged the week before last, the issuer had added Citi and MUFG to the top line — two leads with a greater pedigree in CEEMEA bond syndication — and two major ratings agencies had scored the trade with expected ratings of BB-, in the case of Fitch, and Ba3 from Moody’s.

The issuer had listened and tweaked its offer and so a banker on Agrobank’s deal told GlobalCapital that another round of marketing would take place and to expect the note last week.

But still there has been no bond.

Leads argued that because of the recent rally in Treasuries, the CEEMEA primary bond market was busy this week and the deal might have struggled for investor attention. They said they were also waiting for feedback from some buyers. They saw little harm in pausing a bit longer and said that investors don't dictate a deal's timing.

But momentum helps a deal, and twice warming investors up only to hold off of pricing will not encourage some investors. A stop-start approach could end up costing Agrobank.

No bond mandate is a sure thing in any market but there are degrees of comfort an issuer can weigh against its need to raise cash by a given deadline.

One investor said he was surprised to see Agrobank wanted to come to the market recently given that the National Bank of Uzbekistan's bonds due 2025 — a major comparable — were trading near a 10% yield when the deal came back to life, having been mid-8.5% in June.

The investor said he had discussed Agrobank as needing to offer a double-digit yield in June. It would need to pay even more than he initially calculated now.

But the issuer must have had a good idea of demand and the premium it would have to pay from its meetings in the summer. The latest rally in Treasuries would have improved the overall yield for Agrobank. Competing issuance aside, why the delay?

Certainly, removing the pressure to execute a bond the minute the roadshow finishes benefits the whole market but issuers can only to go the well so many times, especially if they are a debut issuer pricing a high yielding bond in a volatile market.

It is quite possible that by the end of this week we could be celebrating a stunning market debut but Agrobank will only get one chance to make a first impression.