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

17 October 2019
IFR

Uralkali breaks six-year absence


Russian potash producer Uralkali ended a six-year absence from the bond markets on Tuesday, cutting 37.5bp from IPTs for its US$500m October 2024s.

The five-year was initially marketed at 4.375% area. Peers included EuroChem (Ba3/-/BB) and PhosAgro (Baa3/BBB-/BBB-), with leads seeing the former's March 2024s at 3.65%.

Pricing was revised to 4% as books were more than two times subscribed. There were bids from 90 investors while there was material interest from the lead managers too, according to a lead.

Another lead, Andrey Solovyev, global head of debt capital markets at VTB Capital, said: "We have been able to reach very attractive spread indicators during the transaction."

"At [swaps plus 240.5bp], the spread on this placement is 40bp lower than the equivalent figure of Uralkali's previous Eurobond issue," said Solovyev.

The trade was Uralkali's first since 2013, when it sold a US$650m 3.723% note that came at swaps plus 285bp.

The company generates about US$1.7bn of Ebitda but its high leverage ratio had precluded it from coming to the market in the past.

Uralkali was expected to issue this year back in January by ING analysts, who said at the time that plans to increase production would require "an intensive capex programme".

"Obviously, compared to the international bond markets, a lot of the Russian corporates can get better funding conditions with some of the local market players," said the first lead."But the levels on offer are predominantly the hook that is bringing them back into bonds."

The company is focusing on deleveraging. Its net debt to adjusted Ebitda was 2.9x as of June 30. That compares with 3.35x at the end of 2018 and 4.01x at end-2017. Its medium-term aim is to reach 2x-2.5x.

Uralkali is rated Ba2/BB-/BB- and is on a positive outlook with all three rating agencies.

JP Morgan, Sberbank CIB, Societe Generale and VTB Capital were the global coordinators. They were joined on the books by Credit Agricole, ING, Natixis, Renaissance Capital, UBS and UniCredit.

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