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24.10.2006 - MDM Comment: Russia and CIS debt market

(for a pdf  version of the Comment pls see enclosed file)
Sibacadembank (B1/NR/B): a comment on the credit profile and the new 5-year rouble bond (page 2).
Brief: TNK-BP (Baa2/BB+/BB+) announced interim dividends of USD3.6bn for 9m 06, on top of USD4.9bn dividends for 2005. The company’s shareholders are apparently taking out the revenues from the sale of Udmurtneft (USD3.5bn). Extremely aggressive dividend policy is of course a credit negative. At the same time, we estimate that the company still maintains moderately conservative leverage (Net debt/EBITDA around 1.0x). We believe spreads may widen on these news as well as rumours that current shareholders may be looking to exit. At the same time we would recommend to use any significant widening in TNK-BP bonds as a good entry point.
Brief: Sberbank (A2/NR/BBB) reports solid 9m 06 RAS financial results and says may make a new share issue. We believe that the government will retain a controlling stake in Russia’s largest bank (currently 60% stake) and view the news as neutral for Sberbank’s bonds, which trade tight to the sovereign curve on implied state support.
Brief: Severstal (1/-/-) is starting its IPO road-show. Its controlling shareholder A. Mordashov plans to sell up to 15% of it shares and subsequently buy the new share issue of around 10%, which should add some USD1.0-1.2bn to the company’s equity capital. Subsequently new m&a attempts are possible. We are moderately positive on the company’s credit profile.
Brief: Kazkommertzbank (Baa1/BB+/BB+) is due to place new GDRs at LSE early November. New share issue is part of the deal, size is yet unclear. Anyway, the deal should help support capital adequacy of the quickly growing bank. Spreads on KKB’s longer dated bonds have tightened recently by approximately 30bp, which reflects expected positive impact of the IPO on the credit profile of the bank.
Eurobonds: on Monday Russian Eurobonds have been quietly following US Treasuries. Russia 30 traded down to 110.8125, maintaining the spread at 107bp. Corporate bond prices were a little lower as well with very few trades. We expect Russian Eurobonds to continue drifting behind US Treasuries until FOMC releases its decision on FED RATE and more importantly, the accompanying comments.
Ruble bonds: yesterday ruble bonds were under pressure from a combination of two factors – lower Eurobond prices and high overnight rates (6-8%). The latter is explained by tax payments and related shortage of rouble liquidity in the banking system. Prices on longer dated OFZs and 1st tier bonds were down 15-20bp yesterday, 2nd and 3rd tier issues remained almost unchanged. This morning we again see more sellers. Today 3 new issues are priced. The 5-year 3bn issue from Sibacadembank (B1/NR/B) appears to be the most interesting.

PDF MDM FI Morning Comment 24.10.2006
Adobe Acrobat document, 138 Kb
20.02.2008 15:59