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10 September 2021
Investors were inundated with debts

Vitaly Gaidaev
Russian companies have returned to the placement of Eurobonds

During the first decade of September, Russian issuers conducted several large placements on the foreign debt market at once. Three industrial companies have attracted almost $ 1.3 billion with high demand and lower rates, and two banks are preparing to exit in the near future. Along with seasonal factors, companies are rushing to fix the current low rates, which may increase in the event of a curtailment of monetary incentives in the United States.

After a one-and-a-half-month break, Russian issuers have reappeared on the Eurobond market. Last Wednesday, SUEK placed five-year Eurobonds for $500 million with a yield of 3.375% per annum. On Thursday, Phosagro and Veon placed seven-year and five-year Eurobonds for $500 million and 20 billion rubles at 2.6% and 8.125%, respectively. In all cases, the initial yield targets were reduced by 0.4-0.65 percentage points. In the near future, the placement of Eurobonds with ICB and Tinkoff Bank is planned. In September, there is traditionally an increase in the activity of issuers in connection with the release of semi-annual reports under IFRS. In addition, at the beginning of autumn, portfolio investors come out of summer vacations and actively participate in initial placements to replenish their portfolios, market participants indicate.

"Taking into account that the markets remained volatile throughout the year, and now there is a favorable window for placement, many issuers decided to take advantage of it and enter the international market with new issues, without waiting for an even larger volume of initial supply not only from Russia, but also from emerging markets," notes Denis Shulakov, First Vice President of Gazprombank. According to the head of Arikapital, Alexey Tretyakov, Russian issuers decided to take advantage of the opportunity to place Eurobonds at low rates. Moreover, there are growing fears in the market of an increase in base rates in US dollars, which will inevitably happen in the event of a curtailment of the Fed's soft monetary policy. In recent months, representatives of the US regulator have repeatedly stated that with the further economic recovery, the Fed may reduce the asset repurchase program by the end of this year or at the beginning of next year.

Despite expectations of an increase in rates, investors are willing to buy Russian Eurobonds. "Large inflation is unlikely to be defeated only by verbal interventions, so a possible increase in US rates is quite likely and worries many investors. But there is so much money now, and it is so cheap that investors buy assets without taking into account possible risks that may be realized in the future, " says Alexey Skaballanovich, asset manager of the Region Asset Management Management Company.

In the coming months, market participants expect a large number of issuers to enter the market. According to Alexey Tretyakov, 13 issues will be repaid in the first half of 2022, and companies that do not fall under sanctions, such as Rusal, Evraz, Russian Railways, Norilsk Nickel, Polyus Gold, Global Ports and Severstal, may well refinance ahead of schedule. "A significant number of placements of Russian issuers on foreign debt markets will take place in September and October. The companies will offer Eurobonds denominated in all major currencies - the dollar, euro, Swiss francs, and several euro - ruble placements are also planned," said Andrey Solovyov, head of the Debt Capital Markets Department at VTB Capital. Judging by previous placements, metallurgical companies prefer to place dollar Eurobonds. Previously, Gazprom and Russian Railways were mainly placed in Swiss francs, Gazprom in euros, and RusHydro in rubles. "Russian issuers have carried out serious preparatory work, including in terms of taking into account the requirements of responsible financing (ESG), which undoubtedly revives the interest of investors in new issues," Denis Shulakov notes.
Corporate Communications VTB Capital