By Art Patnaude
Russian oil and gas giant OAO Gazprom (GAZP.RS) Wednesday was
selling a longer-dated bond as part of its two-tranche deal, taking
advantage of demand among investors for new corporate bonds from
the country.
The state-controlled issuer was preparing to sell both 15-year
and seven-year bonds denominated in dollars.
There are few companies in developing countries that can afford
to sell bonds with maturities beyond 10 years, with the risk of not
being paid back perceived to be too high. But ties between the
Russian government and Gazprom provide an added confidence needed
to issue longer-dated bonds.
"Gazprom is a well-known quasi-sovereign company with a
still-strong credit profile, meaning it can print longer paper,"
said Alexander Sklemin, credit analyst at Raiffeisen Bank in
Vienna. "I believe one of key reasons for this deal are refinancing
needs, so the longer the maturity profile, the better," he
added.
Gazprom in the past sold two 30-year bonds, which mature in 2034
and 2037, according to Tradeweb data. After those, the next longest
bond comes due in 2022. Credit analysts said that the 15-year
bond--maturing in 2028--fills that gap.
The new 15-year bond was set to price with a yield in the area
of 5%, while the price of the 7-year bond was guided toward the
area of 3.85%, a banker working on the deal said.
Companies from weaker euro-zone economies started selling
longer-dated bonds this month after years of being locked out of
public markets. Last week, Italian utility Hera SpA sold a 15-year
bond, the longest-dated corporate bond sold from that country in
more than two years.
Growing confidence that the worst of the financial crisis is
passed, and investors hunting for returns amid low-interest rates,
supported such sales.
However, market participants said this trend isn't applicable to
Gazprom.
The corporate credit market for Russia and former Soviet
Republics "doesn't have a big history of longer-dated bonds sold
publicly," Mr. Sklemin said. "I wouldn't say the market is really
keen on buying longer maturities from Russia in general. Under the
current market conditions, investors seem to be eager to buy any
reasonable new offering, so Gazprom can allow itself to go further
out on the curve."
A banker working on the deal said other companies can sell
longer-dated bonds in their local currencies, but not dollar deals
marketed to international investors.
BNP Paribas, Gazprombank, and JP Morgan were the banks running
the deal, which is expected to price later Wednesday.
The issuer is rated investment grade, with a Baa1 rating from
Moody's Investors Service, and BBB ratings from both Standard and
Poor's and Fitch Ratings.
(Sarka Halas contributed to this report.)
Write to Art Patnaude at art.patnaude@dowjones.com