Planning A Bond Issuance On AIX: Practical Guidance

AIX has become an increasingly popular and practical platform for companies in Kazakhstan seeking access to debt capital markets. Successful execution of a bond issuance on AIX depends not only on regulatory compliance but also on how well the transaction is structured from the outset. Key decisions, including the choice of issuer, the offering format and the investor targeting, directly affect the deal timing, documentation and overall feasibility.

This article highlights the main practical aspects to consider when planning a bond issuance on AIX.

Typical issuer scenarios for bond issuance on AIX

In the AIFC practice, there are the following three main structuring scenarios:

1. Issuance by an AIFC-registered company

This scenario is commonly used where investors prefer the issuer to be located within the AIFC jurisdiction. Its key advantage is that the AIFC operates under a legal framework which is closely aligned with English law while the core business continues to operate in Kazakhstan. In practice, this creates a balanced structure combining internationally familiar procedures with local business reality. For many foreign investors, such structure is significantly easier to assess and accept.

2. Issuance through an SPV

The issuance through an SPV remains a standard approach for Eurobond-style transactions (including Reg S/144A structures). It is typically used where:

• investors expect a conventional offshore issuer structure; or
• the issuer’s group aims to separate financing activities from operating risks.

It is also relevant where a Kazakhstan LLP or JSC prefers to isolate debt obligations from its key operations and present a cleaner credit profile.

3.Issuance by a Kazakhstan onshore entity

This option is applied where a business already operates through a Kazakhstan LLP or JSC and there is no practical need or possibility to establish an SPV or migrate the structure into the AIFC. In reality, the creation of an SPV may be restricted or be simply too complex from an internal approvals’ perspective. For this reason, some large national companies in Kazakhstan (Kazatomprom, KazMunayGas, Kazpost, etc.) issue bonds directly through onshore entities.

Before launching a transaction, it is important to determine which of the above scenarios applies as each of them drives the transaction roadmap and regulatory steps. For example, under scenario 2 above, it is necessary to establish an SPV in the form of a special purpose company within the AFSA framework. This requires additional preparatory steps, including engagement of a corporate service provider, preparation of constitutional documents, appointment of management, etc.

Exempt offer vs public offer

Almost every AIX transaction starts with deciding whether the offering will be structured as an exempt (private) offer or a public offer.

Exempt offer

Under the AIFC Market Rules, securities may be admitted to trading and offered without a prospectus if they satisfy one or more “Exempt Securities” conditions:

• the offer is addressed to professional clients only;
• there is a limited number of investors (in certain cases);
• there is a minimum investment threshold (USD100,000);
• there is minimum denomination per security; and/or
• there is a capped aggregate offer size.

In such cases, instead of a full prospectus the issuer prepares an offer document or offer terms acceptable to AIX, ensuring timely public availability.

In practice, an exempt offer still requires a structured disclosure package, which as a rule includes a term sheet (the offering document), audited financial statements, key risk factors; and contractual documentation (agency or trust structure).

Public offer

For public offerings, a prospectus is required. The prospectus must contain full, accurate and non-misleading disclosure and be approved by AIX. Under the AIFC Market Rules, the listing application must be submitted at least 20 business days prior to the expected prospectus approval date. Although AIX may shorten this period upon the applicant’s request, this should not be relied upon during planning.

In Kazakhstan-related transactions, the choice between an exempt offer and a public offer is subject to commercial factors. Exempt offers are usually preferred when: target investors are institutional or professional; the speed of execution is important; and/or higher denomination instruments are acceptable. Public offers are more appropriate when: broader distribution, including domestic investors, is required; the issuer pursues a benchmark or market positioning objective; and/or establishing a public pricing curve is needed.

Regulatory and listing process on AIX

In practice, the AIX process can be viewed as two parallel tracks: listing/admission; and offering and documentation. These tracks overlap and must be managed simultaneously.

In listing/admission, key steps are as follows:

• Eligibility and readiness assessment: For debt securities, AIX generally requires two years of audited financial statements, subject to possible waivers. This is not purely formal – AIX must be satisfied with the overall suitability of the issuer. In this context, AIX, in addition to audited financial statements, may also require an independent valuation of the issuer’s assets, particularly for secured bonds, to assess the adequacy and enforceability of the collateral package.
• Application preparation and submission: AIX requires submission of the application form together with the final offering document. The exact package depends on whether a prospectus is required, as described above.
• Review process and comments: The process is conducted through the AIX Online Listing Platform and involves iterative comment rounds. In practice, the timelines may extend up to eight weeks, particularly in cases of incomplete documentation or internal approval delays.
• Indicative processing timeline: For complete documents, AIX typically processes admission within approximately one week for non-equity securities, excluding the prospectus approval time.
• Admission effectiveness: Admission becomes effective only upon publication on the Official List. In practice, AIX issues a formal notice of admission, which serves as confirmation of the listing.

As mentioned above, offering and documentation usually progresses in parallel with listing/admission. It often impacts the transaction timeline as investors will not engage without a clear documentation package. The basic documentation includes the offering document (prospectus or offer terms), the subscription agreement/placement agreement and the trust deed/fiscal agency agreement and determines the allocation mechanisms, investor protection clauses, financial flows and the standard provisions.

Common issues related to bond issuance on AIX

Common issues observed in practice in relation to bond issuance on AIX include:

• treating exempt offerings as simplified and underestimating disclosure requirements;
• insufficient planning of the prospectus approval timeline;
• late consideration of settlement and custody arrangements;
• underestimating ongoing disclosure and reporting requirements;
• for ESG/green bonds – late development of relevant documentation and misalignment of the bond terms with investor expectations and AIX requirements.

AIX provides a flexible and investor-friendly platform for debt capital markets transactions involving Kazakhstan. However, successful execution of a bond issuance on AIX requires its careful planning at an early stage, particularly when selecting the issuer model and offering format. In this context, drafting a comprehensive roadmap considering all factors which might affect the approval by AIX, investor expectations, and the type of bonds to be issued is essential.

Sources:

1. AIX Business Rules https://gfc.aifc.kz/uploads/AIX-Business-Rules.pdf
2. AIFC Market Rules https://aifc.kz/legal-framework/market-rules/
3. AIFC Special Purpose Company Rules https://aifc.kz/legal-framework/special-purpose-company-rules/special-purpose-company-rules-full-text/

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.