Page 77 - RusRPTOct19

The company intends to use the funds to continue carrying out its growth strategy and to optimize its credit portfolio. The Eurobonds were purchased by global investors, more than half of which were foreigner (Russia, 41%; Continental Europe, 26%; Asia and MENA, 15%; the UK 11%; the USA, 7%). Moody’s rated the bonds at Baa3, while Fitch gave them a rating of BBB-. "For the new Sibur [placement], we estimated fair YTM [yield-to-maturity] at 3.35- 3.45%, thus, we see no more than 10bp of potential yield decline," BCS Global Markets commented on September 17. Sibur is the leader of the Russian petrochemical industry and one of the largest companies globally in this sector. Most recently Sibur voted to pay a record-high dividend of RUB33.8bn ($0.5bn) for 2018. Throughout the end of 2018 Sibur was in focus as the company was expected to announce a highly anticipated IPO, to raise $2bn- 3bn based on a valuation of $20bn-$26bn.
Russian corporates have increased their Eurobond issues in the first eight months of this year up to $7bn with another three companies planning to tap the market in September for another $1.6b, Reuters reported on September 25. Russians bonds are benefiting from the reversal of the money policy tightening in the US after the US Federal Reserve bank reversed its position over the summer and has cut rates twice this year already making investors “risk on.” Three major Russian companies tapped the Eurobond market in September and more are expected to join them to capitalising on lower borrowing costs. Russian companies raised $1.6bn in Eurobonds in the first three weeks of September. Russia’s steelmaker Severstal, petrochemicals company Sibur, and pipe producer Chelpipe all issued dollar-denominated Eurobonds. Amongst those companies with plans to issue a Eurobond in the near future are the national rail company Russian Railways (RZD) up-and- coming bank Sovkombank and State Transport Leasing Company according to reports. Experts say Russian corporates could raise an additional $2bn-$3bn before the end of the year. In June, VTB Capital, one of the main organisers of corporate borrowing in the country, said up to 10 Russian companies were considering issuing Eurobonds in 2019, taking advantage of favourable market conditions, reports Reuters.
Moody's Investors Service downgraded the OPRORU 21 bond issue of Russian real estate developer O1 Properties to junk-level Caa1 rating, with Negative outlook, the agency said. The rating of O1 Properties itself was kept at B3 level. OPRORU 21 carries yield to maturity of 36.3% and trades close to 63% of face value, according to BCS Global Markets. As reported by bne IntelliNews, the troubled O1 Group of Boris Mints had a 61.2% stake in О1 Properties acquired by Cyprus-registered Riverstretch Trading & Investments (RT&I), reportedly affiliated with state-controlled Rosneft oil giant. Reports also claimed that Financial Corporation Otkritie could get 35% stake in the developer.
Fitch Ratings upgraded the long-term credit ratings of Russia's national air carrier Aeroflot Group from BB- to BB, with a Stable outlook, the agency said on September 24. The agency attributed the upgrade to group's solid business profile, multi-brand format and diversification of routes, as well as continuing growth in passenger traffic. "We expect no significant change in the company’s cost of financing and lease costs on the back of the upgrade," BCS Global Markets commented, seeing the news as neutral. High jet fuel costs have hurt Aeroflot's margins badly in 2018, but the carrier managed to contain cost growth and hedged against oil price fluctuations. Recently Aeroflot's investment case was seen as improving in both structural and fundamental terms, seeing a brighter outlook on regulatory and cost relief in 2019-2020, as
77 RUSSIA Country Report October 2019 ww.intellinews.com