Set with discount
On Monday, April 11, their five-year Eurobonds placed the leading operator of container terminals in Russia, Global Ports. Investors bought the bonds for $350 million, although the company originally hoped to sell 1.5 times less. The organizers of the transaction were ING, J. P. Morgan, Raiffeisen Bank International, Sberbank CIB, UniCredit and VTB Capital. As told RBC a source familiar with the results of the placement, demand exceeded supply by several times. “Such a rush we remember not long ago, investors literally ripped the paper apart. This is despite the fact that it was a debut issue”, — shared her emotions was one of the organizers.
Two investment banker reported that, initially, the Issuer is expected to accommodate a yield of 7,25-7,5% annual, but during the negotiations it was reduced to 7-7. 125% per annum. Was taken by the Issuer as a result under 6,875%, knows one of the bankers involved in the placement. He added that among the buyers were dominated by funds and institutional investors from European countries. “The Russians were not enough, as the company placed ruble-denominated bonds by 15 billion and picked from the local market all the demand”, — said the financier.
Global Ports Investments is the leading operator of container terminals on the Russian market. Transportation Investments Holding Ltd (controlled by Nikita Mishin, Konstantin Nikolaev and Andrey Filatov) and APM Terminals (Maersk) is owned by 30.75 per cent, Ilibrinio Establishment Limited and Polozio Enterprises Limited 9%, free float of 20.5%.
In the Wake of Gazprom
Global Ports not only the Issuer, which has taken on the foreign market in recent days. On April 11 closed the deal the investment Bank “Renaissance capital”, having placed five-year Eurobonds worth $200 million at 9.5% per annum. As part of the transaction, the investment company offered investors to exchange the Eurobonds maturing in 2016 at a new release, with the possibility of put option in two years. The holders of bonds presented for exchange securities of $96,3 million
At the end of March the transaction on placing of three-year Eurobonds at a yield of 8.5% per annum closed the Bank. The volume of the issue amounted to $150 million According to the Bank, the buyers of bonds were made by investors from Hong Kong, Singapore, Zurich, Geneva and London. The acquisition of the securities was attended by Russian investors.
In mid-March of Eurobonds on 500 million Swiss francs has placed Gazprom. The coupon rate was lower than the yield of similar securities traded in the secondary market (3,69%), and amounted to 3,375%. The organizers of the issue were Deutsche Bank, UBS, Gazprombank and the investment Bank “Renaissance Capital”. Thus, as have informed RBC head of debt markets UBS Ranko milić, the Bank had not seen such a high demand for securities of Russian issuers. “Investors have sent an application almost 2 billion Swiss francs,” he commented the results of the placement. Eurobonds of “Gazprom” bought up by European investors.
From sales to purchases
Managing Director and head of debt products, “Renaissance capital” Dmitry Gladkov says that the demand for Eurobonds due to the high level of liquidity in the capital markets. “After the volatility that was in the beginning of the year, the markets calmed down, investors became more confident,” he says. In addition, according to the banker, investors now do not expect a dramatic increase in the fed rate, so they are willing to invest in risky assets.
Sberbank CIB analyst Alexey Bulgakov said that against the background of rising oil prices since the beginning of the year the interest of foreign investors in assets of emerging markets began to recover. “At the end of last year investors sold the securities of issuers in emerging markets, expecting further deterioration of the economy. From the beginning, they are growing their positions on the back of higher oil prices,” he commented.
“The increased demand is related to the fact that not long ago housed a high-quality issuers out of Russia. Over the last couple of years the market of Russian Eurobonds dropped 20%,” — says Director for analysis of financial markets and macroeconomics UK “Alfa-Capital” Vladimir Bragin. He said that to buy debt securities of Russian companies is becoming more difficult, as investors prefer to hold them to maturity. “From the point of view of the balance of risks and profitability of our Eurobonds are very attractive,” — said the expert.
The demand for Russian corporate Eurobonds is also supported by local investors, says Bulgakov. According to estimates Sberbank CIB, about 60 -70% of the holders of Russian securities with maturity up to 5 years — banks and private investors from Russia. “The volume of deposits in the banking system is growing and lending is reduced, this leads to increased liquidity in the system and falling interest rates on deposits. Against this background, foreign currency Eurobonds in comparison with foreign currency deposits are attractive asset for many local investors,” said the analyst.
Front shaft offerings
“Now quite a good time for issuers because rates fall. This enables companies to accommodate even below the yield of traded issues. For example, we placed a new issue of Eurobonds with a coupon of 9.5%, while our paper traded at a yield of 11%,” says Gladkov from “the Renaissance the capital”.
Analyst RusRating Anton Tabah notes that despite high rates, to take on the West now more profitable than the domestic market. “A year ago, the spreads between ruble-denominated bonds and Eurobonds were much broader,” — says Tabah. From the beginning, the price of a five-year corporate bonds grew by approximately 8-12 percentage points, yield dropped accordingly So even the company, which six months ago had hoped to refinance its debt or raise funds through state-owned banks, can now consider entering the international market as a meaningful alternative,” says Bulgakov.
According to Bragin, placement of Eurobonds, which took place in March-April, indicate that companies have begun to test the market, trying to determine a fair price. “It is not excluded that then we will see the shaft offerings, which, of course, because of the sanctions may be less than in 2013, but will be large enough. The market is ready to digest a considerable amount of papers,” he says. The investment banker from West Bank notes that now many large companies are negotiating with investors, trying to decide on their investment plans. In particular, according to him, the paper for about $500-700 plans to place the company “SIBUR”. “If rates continue to fall, we will see billions of dollars”, — said the banker.
“We do not exclude the possibility of occupancy, however, any decisions in this regard have been taken,” — said RBC in the press service of SIBUR. According to the official representative of the company, now the cost of placing of Eurobonds of Bank financing is higher. “But we see that market situation is gradually changing. If the opportunity to save on interest rates and lengthen loan portfolio, we consider the possibility of placing of Eurobonds”, — he noted. In SIBUR’s focus on profitability in 3,914% per annum, with the coupon, the company placed its debut issue of Eurobonds in early 2013. Then the volume of the issue amounted to $1 billion.
The deficit will remain
According to Dmitry Gladkov, this year the volume of bond issuance can be significant and will be higher than in 2015. “We expect that this year will leave issuers with a $300-500 million is Not excluded that there will be more significant releases,” says the investment banker.
According to the Bank of Russia, in 2015 Russian companies placed Eurobonds on $4.7 billion dollars (in 2014 — $8.2 billion), paying off editions at $29.6 billion Portfolio traded in the market external corporate, sovereign and regional Eurobonds by the end of 2015 decreased by 14.7% to $175,5 billion Euro (in rubles grew by 8.6% due to currency revaluation). In particular, in December Evraz placed five-year Eurobonds for USD 750 million at 8.25% per annum, in November, its debt securities under 5,625% up to $500 million placed by Alfa-Bank. Also Eurobonds in 2015 placed Akbars Bank ($300 million), Norilsk Nickel ($1bn.), Gazprom ($1 billion)
According to Bulgakov, despite new releases, growth of the Russian market of Eurobonds in 2016, also should not be expected. “The market will continue to shrink because 60% of Russian Eurobonds in circulation account for companies under sanctions,” he explained.