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53

Russian Railways may sell seven-year dollar bonds

Russian Railways, or RZD, is planning to sell seven-year dollar bonds, its first foreign-currency offering and the longest maturity by a Russian company outside the energy sector in almost two years.

 

 

The state-owned railroad monopoly is holding investor meetings this week in Europe organized by Barclays Capital, JPMorgan Chase and VTB Capital before the sale, which will be benchmark in size, a banker with knowledge of the transaction said. RZD, the biggest issuer of ruble bonds, is selling international debt ahead of Russia's first sale of foreign-currency bonds since 1998, when the government defaulted on $40 billion of domestic debt and devalued the ruble. RZD chief executive Vladimir Yakunin earlier said the company might seek to sell $1 billion of 10-year bonds.

 

The offering is "the next logical step," because long-term financing is not available on the Russian debt market, said Ian McCall, a director at Argo Capital Management in London, which manages about $500 million in emerging market debt. The seven-year maturity "makes the most sense," McCall said. The international market may not be ready to buy longer-maturity debt from Russian companies outside the energy sector, he said.

 

Gazprom, the state-run gas export monopoly, and LUKoil, the country's second-largest oil company, are the only companies to have issued foreign debt with a longer maturity since the financial crisis. Both sold bonds due in 10 years. A seven-year bond will be the longest maturity issued by a Russian company that does not produce oil or gas since May 2008, according to Bloomberg data. Russian Railways' debt is rated Baa1 by Moody's Investors Service, three levels above noninvestment grade, and one rank lower, or BBB, at Standard & Poor's, the same as Russia's sovereign credit rating. 

Source : Bloomberg