Page 88 - RusRPTMay19

continue to attract various investor groups to Russian local debt, likely still including foreign investors,” said Stephan Imre, an analyst with RZB, in a note.
Some private companies are also starting to look abroad again for financing. Bloomberg reports that a window has unexpectedly opened for Russian companies to tap international markets, taking advantage of cautious optimism following the conclusion of the Mueller report. Bloomberg suggests Russian companies could raise about $1.4bn in March-April through bonds and share sales, including Alrosa, Norilsk Nickel, Polyus, Evraz and food company Cherkizovo. Last week, rail freight company Rustranscom announced plans for a London listing. In late March the Ministry of Finance also took advantage of the dovish turn by the US Fed to sell a $3bn Eurobond. Bloomberg also reported that the non-resident share of ruble-denominated government debt rose in January after 9 months of outflows.
Russia plans to borrow more in April-June and will diversify the mix of OFZ federal bond offerings, the head of the Finance Ministry's debt department Konstantin Vyshkovsky said on March 29 as cited by Prime. Previously in February and March Russia has been placing record-high volumes of OFZ bonds on limitless auctions and tapped into high demand for Emerging Market and Russian debt with the swift placement of two Eurobonds in March. In the first quarter RUB450bn of OFZ bonds were sold, in line with the plan, and the amount offered in the second quarter will "certainly be higher," according to Vyshkovsky. The ministry will diversify its OFZ offering this year by presenting new two-year bonds with coupon payments pegged to money-market rates, so-called floaters. "Floaters are a defensive tool for an investor in conditions when the market is expecting interest rates to grow," Vyshkovsky explained. He also reiterated that Russia was still planning to issue OFZ bonds denominated in Chinese yuan this year, without providing more details. Last week Vishkovsky also said that his ministry is ready to place more Eurobonds in 2019 if the market environment is favourable. The ministry has budgeted $3bn of net external borrowings for 2019 overall and has already beaten the plan. But "the total borrowing programme is still there, its large. We can still place [Eurobonds] to diversify the [financing] sources and given good market conditions," according to Vishkovsky.
The Central Bank of Russia (CBR) has limited the turnover of subordinated and perpetual bonds, deeming the instruments too complex for general public and unqualified investors, the head of the CBR's corporate relations department Elena Kuritsina told the press on April 2.
Subordinated securities are ranked below other forms of debt in terms of claims on assets or earnings of the issuer. As the CBR's banking sector clean- up in 2017 culminated with bailouts of Russia's largest private banks, billions worth of subordinated debt were wiped out.
Kuritsina reminded that most of the subordinated and perpetual bonds of the banks that were bailed out during the clean-up ended up with unqualified investors.
Now the newly issued securities can only be placed with qualified investors with a nominal value of no less than RUB10mn. "We have introduced two tough rules, but these are the consequences of the negative events that we have unfortunately observed," Kuritsina commented.
Most of the subordinated bonds were held either by shareholders of the bank, the managers, or other insiders, who would dump the subordinated bonds on the market once things went bad. Such toxic securities would then be further
88 RUSSIA Country Report May 2019 www.intellinews.com