Russia's State Transport Leasing Company (STLC) on July 12 closed the book for its debut five-year, $500mn Eurobond issue. The placement is a rare occurrence by a state-controlled company amid restrictions on foreign borrowings imposed by Western sanctions against Russia.
However, unlike the recent sovereign Eurobond placement by the Finance Ministry in Moscow, which ended up being mostly domestically bought, the issue by STLC managed to attract considerable foreign interest, possibly indicating a slow turnaround in sanctions-induced caution.
"According to the lead managers, most of the issue was purchased by investors in continental Europe and the UK," Sberbank CIB writes, stressing that local investors were not the key participants in the placement.
"Thus, we can gather that the success of the placement had much to do with the continued high risk appetite among international investors, which is not currently offset by a sufficient supply of Russian corporate paper," the analysts suggest.
Reportedly the issue that placed at a yield of 5.95% oversubscribed almost five-fold, with the guidance yield cut twice by a total of 55bp during the placement due to high demand.
The expected inclusion of the bond in the EMBIG index also contributed to the success of the issue, Sberbank believes. At the same time, the bank sees no upside for the bond's price at the placement yield given the borrower's credit characteristics.
STLC provides leasing services in transport industry. Since 2009, the company has been developing special leasing programmes under a governmental project to modernise road and communal infrastructure and transportation systems of towns and regions.
STLC operates in all Russian regions and is 100% controlled and governed by the Transport Ministry.
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