Sberbank to lead Russian banks back to debt market

14/05/2010 | Sarah White

Sberbank is widely expected next week to bring out one of the highest-profile bond issues from a Russian bank so far this year, amid a big push by lenders in the country to regain access to international funding

Sberbank is widely expected next week to bring out one of the highest-profile bond issues from a Russian bank so far this year, amid a big push by lenders in the country to regain access to international funding despite continued volatility in the debt markets.

The state-owned banking champion, which last printed a eurobond in June 2008, is expected to launch a dollar-denominated issue after meeting European investors on a roadshow..

Although debt issuance from the financial sector in Western Europe has been all but shut by sovereign debt concerns in the past month, few bankers or investors believe A3/BBB Sberbank would have little difficulty in raising external funding.

On Wednesday, lesser-known borrower Credit Europe Bank Russia sold a $200 million three year deal, with a two year put. It was the first Russian issuer to test the waters since the sovereign’s $5.5 billion return to the international markets on April 22.

“The market is open for the large CIS borrowers, although execution has to be timely,” said Alan Roch, emerging market syndicate director at Royal Bank of Scotland, which arranged the investor meetings along with DZ Bank and JPMorgan. The lead banks maintained that the roadshow was not deal specific, however, and that a bond may not emerge from it.

But demand for CIS-related debt has not been dented by Greek worries, nor by a bumpy comeback for the Russian sovereign with its issue. Its first deal since 1998, when Russia defaulted, sank in the secondary market after pricing.

Roch added that investors were still receptive to Russian and CIS names, saying that many large funds were calling for a reallocation into emerging markets, attracted by “good growth prospects, strong fundamentals and well-positioned companies and financial institutions”.

These same arguments have opened up the investor base for the top names in Russia to crossover and investment-grade buyers, as shrinking yields begin to alienate the more traditional emerging markets accounts. Ian McCall, director at Argo Capital Management, said most of the deals now emerging from Russia, including Sberbank, were “simply too tight”.

“We’ve looked at some of the recent deals, like the Nomos Bank [8.75%] subordinated bond, but would rather pick up something like Alfa Bank Ukraine at a yield of say 15%,” he said.

A range of Russian banks, including TranscapitalBank, Bank Zenit and Credit Bank of Moscow are now testing the waters in the international syndicated loans and bonds will deal requests and proposals, despite funding being available more cheaply in the domestic rouble market.

Promszvyazbank (PSB) is set to sign a $250 million loan in June, the first of the year from a Russian borrower. Anna Belyaeva, a director at PSB, said the EBRD, which has an 11.75% stake in the bank, was keen for it to set a benchmark for other financial institutions in the country. With an all-in margin of 340bp over Libor, Belyaeva added that pricing had become “pretty interesting” compared to a year ago.

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