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Interview by Andrey Solovyev, Global Head of DCM at VTB Capital, for IFR

21 June 2019

Russia hooks offshore buyers

Russia took advantage of the rally in rates to raise US$2.5bn in a dual-tranche offering on Thursday that was sold into the hands of investors based abroad.

The deal hit the screens a day before US House Democrats backed legislation to impose more sanctions on Russia, including on sovereign debt, over alleged interference in the 2016 US presidential election.

The sovereign had reopened its 2029s at 3.95% and 2035s at 4.30%, adding a further US$1.5bn in the former line and US$1bn in the latter.

Based on the allocations statistics, UK investors bought more than half of each, taking 55% of the 2029s and 64% of the 2035s. US investors were also significant buyers, taking 24% of the 2029s and 29% of the 2035s.

There were no buyers specifically from Russia, though the statistics did not say whether Russian investors based in other countries were involved.

"There were 120 accounts for each issue, and the deal focused on international investors," said Andrey Solovyev, global head of debt capital markets at VTB Capital, one of the leads. Gazprombank was a fellow bookrunner.

Books closed around US$7bn.

"The initial price guidance was quite aggressive," said Solovyev. "As a result, the 2029 tap was placed at the levels of the secondary curve and the 2035 tap inside the secondary curve."

Pricing was tightened by 5bp from initial levels on the shorter bond and 15bp on the longer note.

It was somewhat ironic that after Jerome Powell's dovish press conference on Wednesday, one of the first borrowers to take advantage of the Fed chief's supportive comments was Russia.

Russia went against the grain of recent CEEMEA sovereign issuance by hitting the US dollar market rather than the euro.

The sovereign (Baa3/BBB-/BBB-) raised about US$3.85bn-equivalent through the international bond markets in March.

Meanwhile, Gazprom may issue in euros before the end of the year, reports Reuters.

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