Russian duo stun with market openers

viernes 9 de octubre de 2015 07:04 GYT
 

By Sudip Roy
    LONDON, Oct 9 (IFR) - The rarity value of non-sanctioned
Russian issuers was made clear this week after two of the
country's leading companies reopened the bond market with
remarkable results.
    No Russian issuer had sold a benchmark-sized deal in the
international market since Gazprom printed a US$700m one-year
note last November. But on Tuesday, miner Norilsk Nickel broke
open the US dollar market, while on Thursday Gazprom became the
first Russian borrower to issue in euros in more than 15 months.
    The deals blew away fears that investors would steer clear
of new Russian paper, with Norilsk receiving US$4bn of demand
for a US$1bn seven-year trade. Gazprom has yet to release order
book details but its 1bn three-year bond exceeded expectations.
    While the deals don't mean there is a wholesale opening for
Russian issuers, they prove the best ones have access. 
    "Sanctions have created rarity value for non-sanctioned
names," said a banker close to the Norilsk deal. "Investors do
want exposure to Russia but there's a much smaller universe of
issuers to choose from."
    "There are still some concerns but for the right credit
there will be demand," he added.
    One investor told IFR that he was still underweight Russia,
but was reducing that position as the country's economy has
shown signs of stabilizing despite the state of commodity
prices. 
    That change in sentiment has been reflected in the
performance of Russian assets as emerging markets investors have
rotated out of more troubled economies, such as Brazil and
Indonesia, to Russia. The sovereign's five-year CDS, for
example, has tightened by more than 200bp this year.
    As it is increasingly hard to buy decent chunks of Russian
paper in the secondary market, where it is often tightly held by
locals, new issues provide international investors with the best
way of rebalancing their portfolios.
    There has also been a significant amount of redemptions and
coupon payments from Russian issuers, adding to investors'
coffers.
    This pent-up demand enabled both corporates to issue at much
tighter than expected levels, and as important, their deals to
trade up in the secondary.
    
    STUNNING RESULTS 
    Leads on both began conservatively offering relatively high
new issue premiums, which allowed the books to build momentum.
As demand grew, they were able to ratchet in guidance.
    The end results were stunning. Norilsk Nickel
(Ba1/BBB-/BBB-) paid roughly a 37.5bp new issue premium, pricing
its deal at a yield of 6.625% after starting in the 7% area.
"It's a great result when you consider the fact that developed
markets are printing with similar," said a banker
away from the deal.
    Gazprom, even more remarkably, came flat to slightly inside
its curve - one of only very few issuers in any market to have
done so in recent weeks. The state-owned energy company printed
at 4.625% from initial guidance of 5%-5.125%.
    Gazprom (Ba1/BB+/BBB-) is a special credit in Russia and its
euro curve has been well-supported, especially by locals,
throughout the year.
    Rival bankers were amazed by the outcome especially as some
were speculating before either deal that Russian issuers would
have to pay at least 50bp new issue premiums. "Unbelievable,"
was the view of one syndicate official about the Gazprom deal. 
    Both Gazprom and Norilsk Nickel have weathered the fall in
commodity prices. Despite a slump in nickel prices, Norilsk has
benefited from the weak rouble, increasing its Ebitda by 8%
year-on-year to US$2.7bn for the first six months of 2015,
according to financial statements.
    Despite their success, the deals are unlikely to presage a
flurry of issuance out of the country, with bankers expecting
deal flow to be spasmodic until sanctions are lifted.
    Instead, the greater immediate significance of the Norilsk
trade lay in it paving the way for CEEMEA issuers more generally
to access the market after a difficult couple of months in which
few deals had been executed. The day after it printed, three
other CEEMEA issuers entered the market including Ghana and
Turkcell, the latter with the first corporate bond out of Turkey
this year.

 (Reporting by Sudip Roy; editing by Julian Baker and Matthew
Davies)