VTB first Russian bank to sell domestic equity-linkers
VTB has sold the first equity-linked notes by a Russian bank in the domestic market — and plans to use other structures, including commodity and interest rate-linked notes.
The bank’s Rb5bn ($154.6m) three-year bonds, issued via VTB Capital Finance, pay a fixed rate coupon of 0.1% with an additional pick-up linked to the growth of Russia's benchmark equity index, the Micex.
Sold publically from June 1-6, the bonds were purchased by a variety of Russian financial institutions and were also distributed via the issuer’s VTB24 retail network. They were rated Baa1 (sf) by Moody’s.
Previously, only foreign banks had sold equity-linked bonds in the Russian domestic market, according to Mark Richardson, global head of equity derivatives at VTB Capital. The latest bonds were launched from a new platform that will allow VTB to take advantage of other structures, although the firm has not made its precise plans clear.
“We are already considering several other new products — clearly these will be market-timing dependent and will be tailored to what our clients are looking to invest in,” Richardson told EuroWeek.
The launch of the bonds is a step towards bringing the Russian market up to international standards, VTB said in an announcement. However, the bank is no stranger to equity-linked notes, having sold the structure to international investors via its euro medium term note programme in the past.
VTB has sold deals in both public and private placement format via its EMTN programme but the new domestic structured platform will be used solely for public deals, according to Richardson.
“The platform is designed in such a way as to facilitate a range of multi-asset class instruments for public distribution,” he said.
VTB announced plans in May to sell more equity-linked notes in dollars and roubles in MTN format on a reverse enquiry basis. Unlike the new domestic platform, the equity-linked MTNs would be sold to sophisticated investors only, not retail accounts.