25.09.2008 - MDM Comment: Severstal adds to the "good news" flow

Severstal yesterday announced that it signed a USD1.2 bn 5-year syndicated loan facility. The transaction was closed at LIBOR+225bp. Leaving aside the subject of why loans are priced so cheap vs bond and CDS spreads, we would like to focus on the very fact of such transaction taking place amid global liquidity crisis.

Yes the facility was likely initiated before the crisis reached its peak this month, but still we take it as a signal that Russian borrowers are not completely switched off the capital markets. To remind, Sberbank is about to close a loan deal of similar size (1.2bn) shortly.

In combination with earlier reports about Gazprom reducing its already low leverage as well as bond buy-back intentions from URSA Bank and even VTB (yesterday VTB's CFO didn't rule that out, although we don't view the buy-backs from VTB as very likely) we think it creates a good basis for some stability and even a bounce back in Russian corporate Eurobond segment.

We are not sure about the longer dated papers, but at the short end of the curve there is definitely some truly exceptional value (GMKNRU 09 at 12.5%, TRUBRU 09 at 14-16%, ALFARU 09 16%, RUSB 09 or '10 at 20-25% and many more).

25.09.2008 12:32