Page 103 - RusRPTNov20

8.5.1​ Fixed income - bond news
Gazprom​ issued a $1.4bn perpetual Eurobond at a coupon rate of 4.6% on October 13. The initial target for the bond’s yield was 5-5.25%, per Interfax’s unnamed sources, but this was reduced twice due to high interest in the issuance, first to 4.875-5%, then to 4.625-4.75%. In the end, Gazprom received $4bn of interest at the 4.6% rate, covering the offer by 2.8x. Next up is a similarly-sized Eurobond of EUR1bn, which is reportedly being priced at 3.9%. Gazprom shows significant ability to refinance, while lowering cost of debt. For equity holders, the main takeaway is that Gazprom has substantial ability to refinance itself while, apparently, lowering its cost of debt. In 2019, the company’s average cost of debt, per its IFRS accounts (and including both capitalized and expensed debt), was around 5.2%, so on the margin this signals a lowering of the company’s borrowing costs.
Russia’s state-owned gas supplier Gazprom has raised almost $2.6bn from the issue of perpetual eurobonds​, it reported on October 27, in a bid to refinance some of its debt. Gazprom has been hit hard by the slump in gas demand this year triggered by the coronavirus (COVID-19) lockdowns, with its net income almost halving in the second quarter on the back of lower prices and much weaker sales to Europe. Its net debt had ballooned to RUB3.68 trillion ($53bn) by the end of June, up 16% from six months earlier because of a crash in the ruble's value. Gazprom said in a statement it had placed $1.4bn in US-denominated notes and some €1bn ($1.2bn) in euro-denominated bonds. Demand for the bonds exceeded $7.4bn, it said, noting this marked the
103 ​RUSSIA Country Report​ November 2020 www.intellinews.com