CEE monthly bond wrap: Russia defies the west with two bond issues

CEE monthly bond wrap: Russia defies the west with two bond issues
Bond traders ignored one of the tensest weeks in Russia's relations with the UK in years to snap up two big Eurobond issues / bne IntelliNews
By bne IntelliNews April 5, 2018

Bond issues from emerging markets (EM) were strong in the first quarter of this year with a total of $63bn issued. While the number of issues from CEE was down year-on-year to only five new bonds worth a total of $2bn versus 15 issues that raised $10.7bn a year previously, the CIS and Russia in particular were more active, with six issues that raised $5.8bn and four issues that raised $4.9bn respectively in the first quarter – both well ahead of the volumes raised a year earlier.

In CEE the biggest issues were from leading Turkish commercial bank Yapi Kredi Bank that issued a $500mn bond that matures in 2023 and has a coupon of 6.1%. The Turkish economy is growing strongly – almost too strongly, as some economists are warning of the danger of overheating. Leading Polish commercial bank was also in the market with a €500mn bond that matures in 2024 and pays only a 0.75% coupon. The whole of CEE is booming, and the problems there are more subtle with rising wages and a shortage of labour being the main issues. That boom is manifest in Globalworth Real Estate Investments' issue of a €550mn bond that matures in 2025 and pays a 3% coupon to raise funds to continue its developments as the demand for real estate is high.

In the CIS, Russia dominated with two noteworthy bond issues. As UK Prime Minister Theresa May was speaking to parliament, accusing the Russian state of poisoning a former spy and announcing the expulsion of 23 Russian diplomats, across town state-owned gas giant Gazprom got a €750mn bond away to high demand. The bond matures in 2026 and pays a mere 2.5% coupon. That was followed only days later by a $4bn Russian sovereign issue that will be used to swap the 2023 bonds that are largely held by busted bank Financial Corporation Otkritie. The success of the two issues throws into stark relief the growing divide between how investors view Russia (positively) and how the press and government see it (negatively).

The other significant issues in the CIS were a €300mn bond from Georgia Capital, the investment arm of the Bank of Georgia Group that will use the funds to finance its banking business, and an issue by Mironovsky Khleboproduct (better known as MHP), one of Ukraine’s top agricultural producers that is leading that country’s economic recovery.

CEE - Top issues in March 2018

     

Issue

Currency

Volume (m.)

Lead Managers

Yapi Kredi Bank, 6.1% 16mar2023, USD

USD

500

HSBC, JP Morgan, Mitsubishi UFJ Financial Group, RBS, Societe Generale, UniCredit

PKO Bank Hipoteczny, 0.75% 24jan2024, EUR

EUR

500

BNP Paribas, HSBC, LBBW, PKO Bank Polski

Globalworth Real Estate Investments, 3% 29mar2025, EUR

EUR

550

Deutsche Bank, JP Morgan, Morgan Stanley, UBS

 

CIS - Top issues in March 2018

     

Volume (m.)

Issue

Currency

Lead Managers

Georgia Capital, 6.375% 9mar2024, USD

USD

300

Citigroup, JP Morgan, Renaissance Capital

Mironovsky Khleboproduct, 6.95% 3apr2026, USD

USD

550

ING, JP Morgan, UBS

 

 

Russia - Top issues in March 2018

     

Volume (m.)

Issue

Currency

Lead Managers

Gazprom, 2.5% 21mar2026, EUR

EUR

750

Deutsche Bank, Gazprombank, JP Morgan, Renaissance Capital, VTB Capital

Russia, 4.375% 21mar2029, USD

USD

1500

VTB Capital

 

Data

Dismiss