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20 October 2020

STLC ekes out further duration

State Transport Leasing Company gave its debt profile a nudge of curve extension as it sold a US$500m February 2028 note on Monday.

The new offering supplanted STLC's US$600m 4.65% March 2027s, sold over six months beforehand, as the Russian state-owned company's longest bond.

"We wanted to extend [the curve], however, market conditions don't allow to go very long at the moment, so we decided on going ahead with a Eurobond maturing in 2028 and still enjoy a favourable comparison to the seven-year bond with the tight pricing," said Andrey Solovyev, global head of DCM at VTB Capital, one of the leads and bookrunners.

The other leads and bookrunners were Gazprombank, JP Morgan, Renaissance Capital and Sovcombank.

The 2027s were bid at 4.72% at Monday's open, according to Tradeweb. Pricing for the new issue came at the tight end of guidance at 5.05%, coming in from IPTs of 5.50% area.

"We thought it might come on Tuesday, but when we looked at the market on Monday it was strong," said Dmitry Gladkov, global head of investment banking and head of the financing group at Renaissance Capital.

"We got very good momentum, including anchor orders from continental European accounts, and landed pretty much flat to fair value."

The notes were sold at a discount, pricing with a 4.80% coupon.

"Managing to price it at a discount at 4.80% allowed us to make this attractive from a PR standpoint," said Solovyev, who added that he viewed it as one of the most successful transactions for the company.

"Our strategy was to start with an 'old-school' approach. The trade was played by the book, starting with a wider price guidance at 5.50% area to attract the attention of investors and build a strong order book. This proved to be the right strategy, as the book was over three times subscribed."

Orders for the bond peaked at more than US$1.6bn, with over 140 investors placing orders.

The company is helped by the fact that its bonds are index eligible.

By geography, the notable allocations went to European accounts, which took 34% of the bonds, while 24% went to the UK, 21% to Asia and 14% to Russia, with the rest picked up by the US and others.

The transaction was run alongside an offer from STLC, which is still ongoing, to buy back up to US$150m of its US$500m 5.95% guaranteed notes due 2021.

STLC is rated Ba1 by Moody's and BB+ by Fitch and was upgraded by one notch by both agencies during the course of 2019. The bonds have expected issue ratings of Ba2 and BB+.
Corporate Communications VTB Capital