Russian Railways opens USD 1bn credit line with VTB.

By bne IntelliNews December 28, 2012
Russian Railways (RZD) opened a 2-year credit line with Russia's largest bank VTB worth RUB 30bn (USD 980mn), Cbonds reports. The funds are going to be used for the current operations of the company. To remind, in October 2012 RZD placed an additional issue of 10-year Eurobonds worth USD 400mn at 4.05% annually. The original issue was increased to USD 1.4bn. JP Morgan, RBS and VTB Capital organized the additional issue, demand for which reportedly stood at USD 1.5bn. Initially, RZD placed USD 1bn worth of 10-year Eurobonds yielding 5.7% annually in the end of March 2012. RZD also placed RUB 25bn worth of 7-year RUB-denominated Eurobonds at 8.3%, demand almost twofold exceeding the amount proposed. RZD in the coming 3-5 years plans to borrow RUB 60bn-RUB 80bn (USD 1.8bn - USD 2.4bn), PRIME reported in August citing a corporate finance rep of the company. This would include tapping the Eurobond market at least once a year, with the rest to be borrowed in RUB. This year the company was going to borrow about RUB 100bn, out of which 70% will account for RUB and 30% for foreign currencies. Fitch Ratings believed that 7% cargo rail transportation tariff indexation proposed by the government as of January 1 2013 will not be sufficient to finance the investment program of Russian Railways (RZD, BBB/Stable) in the absence of other financing sources or other support from the state as the only shareholder of the company. RZD itself proposed 11% indexation. Fitch still expected subsidies and capital deposits from the state do support the operational activities and capital expenditures of RZD. At the same time the government reviews additional way of support, such as state guarantees and investing reserves into long-term infrastructure projects. Agency noted that partial privatization of the company (25% plus one share) planned for 2012-2013 is unlikely to affect the ratings of RZD.

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