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Interview by Andrey Solovyev, Global Head of Debt Capital Markets at VTB Capital for Financial Times

4 July 2016
The Financial Times
Evraz leads wave of Russian debt

Russian companies are returning to international bond markets with the largest wave of debt issuance since the country’s annexation of Crimea left it in the capital markets wilderness more than two years ago.

Steelmakers Evraz and NMLK and shipping group Sovcomflot issued Eurobonds of nearly $2bn in total in June, and bankers and executives said other Russian groups were planning to issue debt in the coming months.  

The moves highlight an improvement in Russian market conditions, as a rebound in oil prices combines with a reduction in the amount of debt available to buy after a drought in issuance in the past two years.

Andrey Solovyev, global head of debt capital markets at Russian investment bank VTB Capital, said Russian groups were exploiting opportunities to issue new debt and buy back previous issues due to mature soon. VTB underwrote the Evraz and Sovcomflot bond issues.

“Last year there were very few Russian placements, with the overall volume at $4.5bn, while the amount of matured debt was equal to $19bn,” Mr Solovyev said. “This year, another $16bn worth of Russian debt matures, so there is quite a high level of liquidity.”

Russia’s economic crisis, coupled with US and EU sanctions restricting access to western capital markets, saw the corporate sector’s external debt drop 21 per cent from December 2013 to December 2015.

That risk means Russian corporate bonds offer relatively high returns: the Evraz bond priced at a yield of 6.75 per cent while the NMLK issuance priced at 4.5 per cent.

“Even before the crisis, this would have been a good deal,” Rustem Teregulov, a partner at PwC in Moscow, said.

The bond sales have prompted several other Russian groups to announce they are exploring debt markets.
Andrei Guryev, chief executive of fertiliser producer Phosagro, said the company was looking for opportunities to refinance its Eurobond maturing in 2018.

“I think the economy and the situation for Russian bonds will be better,” Mr Guryev said. “Because all the banks, the American banks, the European banks here, they want Russian corporates again to be in the market because they see huge demand from the global market for Russian bonds.”

Mr Guryev said the Brexit vote had not deterred him: “If there’s demand and, most importantly, rates below our debut issuance, we’ll issue.”


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