Uzbekistan allows issuance of foreign currency bonds

A new opportunity has opened in Uzbekistan’s financial market, allowing businesses to issue bonds not only in soum but also in foreign currencies, according to the National Agency for Advanced Projects of Uzbekistan.

The Ministry of Justice has registered a departmental regulation within a special legal regime known as the “Regulatory Sandbox” in the capital markets sector, which permits the issuance and placement of bonds denominated in foreign currency.

Such bonds are defined as securities confirming the holder’s right to receive the nominal value and income specified in the prospectus, with both expressed in a foreign currency. Legal entities that are residents of Uzbekistan, participate in the special regulatory sandbox regime, and have a positive audit opinion on their annual financial statements are eligible to issue such bonds.

In simpler terms, this means that local companies will now be able to raise funds from the public and investors in foreign currency, such as US dollars, instead of relying only on bank loans or soum-denominated instruments. Bonds are essentially debt instruments issued to borrow money for business development.

The total amount of foreign currency bonds issued by a single issuer is limited to the equivalent of $50 million. These bonds may be issued either secured or unsecured.

Unsecured issuance is allowed only within the issuer’s equity capital at the time of the decision to issue bonds. If the issuance exceeds the company’s equity, the issuer must provide collateral for the excess amount.

The $50 million limit serves as a safeguard to protect investors and prevent companies from taking on excessive debt that they may not be able to repay. If a company wishes to borrow beyond its equity capacity, it must provide guarantees or collateral.

Control over the issuance, placement, circulation, repayment, and income payments of these foreign currency bonds will be carried out by the National Agency for Advanced Projects of Uzbekistan, as stated in the document.

Oybek Rustamov