By Sarka Halas
Russia's largest independent producer of natural gas OAO Novatek
(NVTK.RS) has joined a host of Russian companies that are holding
investor meetings this week, as the country's corporates kicked off
a borrowing spree earlier this month that shows few signs of
slowing down.
Amid the wall of money that continues to flood into emerging
markets, debut issuers and lower-rated firms are lining up to
borrow, while the regular financial names like VTB Bank (VTBR.RS)
and Russian Agricultural Bank have been seen dipping their toes
into the dim sum or offshore Chinese yuan bond market.
Many companies need financing to keep up with growth in the
country. Although the Russian economy is entering 2013 on a weak
note, with GDP below 2.0%, analysts at VTB Capital said in a recent
note that a recovery in 2H will stem from easier monetary policy
and higher public infrastructure spending.
"Russian corporates need to fund and to refinance to grow along
with growth in the country," said Stanislav Ponomarenko, fixed
income analyst at Barclays.
In an era of low interest rates, with investors hunting for
yields in all the dusty corners of the market, ruble-denominated
debt is also looking more lucrative.
"Some of the new issues are reflected by changing market demand.
Investors want to diversify into local currency or pick-up extra
yield via exposure to sub-investment grade credits markets," said
Mr. Ponomarenko.
Just one notch above a junk rating, Novatek is meeting with
investors this week ahead of a potential ruble-denominated bond.
Novatek is rated Baa3 by Moody's, BBB- by Standard and Poor's and
BBB- by Fitch.
"The current market environment allows Russian players to
attract notable amounts in ruble borrowings from the international
markets and not only from the domestic market as investors seek to
boost returns from the foreign currency exposure," said Alexander
Sklemin, credit research analyst at Raiffeisen Bank.
Mr. Sklemin says that ruble borrowing makes sense for Novatek
because its major invoicing currency is rubles. In contrast, at the
end of Q3 last year almost 60% of the company's debt was
denominated in dollars, while the company's export revenues
accounted for as little as about 33% of the revenue.
Also meeting with investors this week ahead of a ruble bond is
OJSC The Agency for Housing Mortgage Lending. AHML is 100% owned by
the Russian government and is rated two notches into investment
grade territory at Baa1 by Moody's and BBB by S&P.
But while domestic markets offer good yield for investors while
allowing Russian companies to diversify their investor base,
junk-rated issuers are borrowing very cheaply in international
markets.
Last week, Sibur Securities Ltd., a unit of OAO Sibur Holding,
rated one notch below junk at B1 from Moody's and BB+ by S&P,
sold five-year debt offering a yield of only 3.914%, comparable to
the yield similarly rated western European companies are
paying.
"Sibur chose a very favourable moment for the primary placement,
this allowed it to boast the lowest coupon among the currently
outstanding Russian 'BB'-rated papers," said Mr. Sklemin.
Whether debut issuer and independent oil and gas development and
production company RusPetro PLC (RPO.LN) will get away with similar
pricing will remain to be seen after it concludes meetings with
investors on Friday ahead of potential dollar bond. RusPetro is
rated B- by S&P. Also meeting with investors ahead of a dollar
bond is Russian oil and gas company OAO Gazprom (GAZP.RS).
Gazprombank (GZPR.RS), Sberbank (SBER.RS), and Credit Bank of
Moscow have already completed bond offerings. Last year in January,
there were no Russian issuers over the same period, according to
Dealogic data, amid the escalating euro zone crisis during the
first half of 2012.
Write to Sarka Halas at sarka.halasova@dowjones.com
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