Record Eurobond Sales as Borrowers Gorge on Rates: Russia Credit
By Lyubov Pronina and Marina Sysoyeva
Russian companies are selling the most foreign-currency bonds on record this month as issuers rush to take advantage of investor appetite for higher yields after the Bank of Japan pledged unprecedented debt purchases.
Corporate bond sales advanced to at least $8.39 billion, according to data compiled by Bloomberg, based on announced deals in dollars, euros and Swiss francs. The average yield for Russian companies fell one basis point this month, compared with an increase of six basis points for Brazilian peers as of April 18, according to JPMorgan Chase & Co. indexes.
OAO Lukoil, Russia’s biggest non-state oil producer, sold its first dollar debt since 2010 and railroad monopoly OAO Russian Railways issued a debut euro-denominated security to take advantage of money managers’ hunt for yield after the BOJ pledged to double bond purchases. Companies are going to market to attract funding for both this and next year, according to VTB Capital, the investment arm of Russia’s second-largest bank.
“A lot of Russians are trying to raise cheap money now and avoid the situation when they need to raise money later this year when as expected rates might go higher,” Andrey Solovyev, global head of debt capital markets at VTB Capital in Moscow, said by telephone on April 19. “It will be more expensive.”
Lukoil sold $3 billion of bonds last week, while Russian Railways raised 1 billion euros ($1.3 billion) from securities maturing in 2021. Evraz Plc, the steelmaker part-owned by billionaire Roman Abramovich, issued $1 billion of notes and iron-ore producer OAO Metalloinvest Holding Co., sold $1 billion of debt due in 2020.
OAO GMK Norilsk Nickel, the world’s largest producer of the metal, and OAO Magnitogorsk Iron & Steel are meeting investors this week, according to people with knowledge of the deals, who asked not to be identified as the information isn’t public.
While Russian and emerging-market issuers are not isolated from external turmoil, investors “are not looking for excuses not to buy,” Dmitry Gladkov, head of Russian debt capital markets at JPMorgan in London, said by e-mail on April 19.
“The market is attractive and more names are looking to place bonds,” he said.
With assistance from Denis Maternovsky and Ksenia Galouchko in Moscow. Editors: Mark Sweetman, Stephen Kirkland