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bne Invest
June 14, 2019 www.intellinews.com I Page 10
Gazprom could increase borrowing by $1.5bn, tap Eurobond market in autumn
Russia's natural gas giant Gazprom could increase its borrowing programme by RUB100bn ($1.55bn) in 2019, Interfax reported on June 10 citing unnamed sources in the company.
Reportedly, Gazprom could tap the Eurobond market in October-November, possibly with euro- denominated placement. Currently the company's foreign borrowing programme for 2019 is set at RUB297.7bn.
Gazprom's Eurobonds issues are often timed and benchmarked by Russian sovereign placements. The head of the Finance Ministry's debt department Konstantin Vyshkovsky
said in an interview to Bloomberg on May 28 that Russia could sell another Eurobond this year denominated in euros or US dollars, after successfully testing the investor sentiment amid sanction risks and swiftly placing $3bn and €0.75bn worth of Eurobonds in March.
Gazprom has over $40bn bonds in circulation under the Euro Medium Term Note (EMTN) programme alone, with the latest issues placed in November 2018 (€1bn) and the next one planned for October 2019 ($1.25bn). In April Gazprom redeemed a $2.25bn Eurobond issue placed in 2009, the issue being the biggest Eurobond placement in Gazprom’s history.
A sovereign placement or a placement of top borrower such as Gazprom could pave way
for more Russian corporate Eurobonds this
year. Favourable market conditions are leading up to 10 Russian companies to consider issuing Eurobonds by the end of this year, VTB Capital investment bank's head of debt capital markets Andrey Solovyov told Reuters in a separate report. "The market is really good now ... There was a rally in sovereign and corporate Eurobonds. The sanctions theme is losing strength, investors expect good yields. And Russia is the country that keeps on offering good yields," Solovyov argues.
Gazprom downgraded to Hold after 40% surge in share price
The shares of Russia's natural gas giant Gazprom are "trading at fair value" after surging by 40% on a recent surprise dividend announcement, BCS Global Markets wrote on June 10, downgrading the recommendation on the name to Hold, but upgrading the target price to $7.5 per GDR.
As reported by bne IntelliNews, the shares in
the so-called “state within the state” spiked by 30% in the last week of May, adding $20bn to the company’s market capitalisation in a matter of days after the management hiked its dividend twice in a week and pledged to comply with the
50% of IFRS net profit payout requirement in the next dividend season.
After the company said it could share about
80% of 2018 of its free cash flow (FCF), the
2018 dividend yield is now estimated at 7.2%,
in line with the average for oil producers, BCS GM estimated, noting that the yield is "not high, given the expected FCF compression in 2019 and negative M2M 2018-20e EPS CAGR (earnings per share compounded annual growth rate)."
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