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24.07.2008 - MDM Comment: Russia and CIS debt market

 

 

 

NEWS, IDEAS AND COMMENTS
Vostochny Express Bank (B3/Positive) held a conference call yesterday to discuss the triggered put option on the VOSEXP 09 RUB issue and the company’s new coupon proposal. The bank basically confirmed that the delays in its merger with affiliated URSA Bank (Ba3/B+), which triggered the put, are purely due to the fact that the banks are unwilling to take the risk of providing all creditors with repayment acceleration options (a very strange provision of the Civil Code). De facto, both banks remain to be closely integrated. Examples include management rotation, as well as regular loan portfolio sales from the Vostochny Express balance sheet to URSA. Shareholding structures remain unchanged.
 
All mechanics of the vote on the put and coupon re-set have been confirmed (we reported those yesterday). We understand that one can still buy the VOSEXP 09 issue, and still will be eligible to vote for the coupon re-set (scheduled on Aug 12). We believe that keeping the bond with a 14.25% coupon makes a lot of sense. Vostochny Express also gave some financial profile highlights: Assets and loan book in 1H08 were up approximately 40% YTD; equity jumped almost 60% YTD mainly due to the new share issue in February; net income increased 60% y-o-y. The bank has no immediate Eurobond issuance plans.
 
By the way URSA Bank will also hold an investor call today at 1pm London time (a “generic” one, we think).
 
Evraz (Ba2/BB-/BB) is reportedly mulling a merger with Ukraine-based Industrial Union of Donbass (NR). (Source: Kommersant). Since there are no deal details yet, it is a little too early to speculate on the potential credit implications. We note, however, that in many earlier M&A deals Evraz behaved with prudence, keeping leverage at moderate levels and avoiding rating downgrades.
 
AHML (A3), the Federal mortgage agency, met analysts this morning. We didn’t hear any significant news at the meeting. The company is tightening its criteria for refinanced loans, still benefiting from very strong government support and looking at alternative sources of funding on top of vanilla ruble bonds (despite having a principal guaranteed by the state, AHML rub bonds are now trading at 300+bp over the benchmark curve, mainly due to intense new supply). We may therefore soon see AHML issuing Eurobonds, securitizations, warehousing deals and loans.
 
 
 
SECONDARY MARKET COLOR AND PRIMARY DEALS
 
Eurobonds: Key highlights include the fact that the new TRUBRU 11 is trading above par, despite the USD200 mn tap yesterday, and the continued volatility in NAFTO 09.
  
Ruble bonds: Very quiet with low volumes and insignificant price moves.
 

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24.07.2008 14:43
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