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EBRD launches first rouble bond issue in Russia
Proceeds to provide long-term local currency financing for real economy
In an important development for its lending programme in its biggest country
of operations, the EBRD has launched a landmark five-year rouble bond issue to
raise local currency that will be used to provide long-term project loans
without exchange risk to the real sector of the Russian economy.
The EBRD's inaugural 5 billion rouble (equivalent to €140 million)
floating-rate issue breaks new ground as the first placed in Russia by an
international financial institution. The EBRD enjoys an AAA/Aaa rating from
international rating agencies.
The proceeds from the EBRD’s rouble bond will be used to meet growing funding
needs for the renewal of Russia’s municipal infrastructure, as well as the
financing of typical clients such as small and medium-sized enterprises (SMEs)
and other Russian borrowers with no or limited foreign currency income.
The bond issue is being launched under local regulations and is destined for
domestic investors. The issue's floating-rate coupon is linked to the recently
created Moscow Prime Offered Rate, a new money-market index launched under the
auspices of Russia’s National Currency Association (NCA). This index is
designed to serve as a transparent benchmark for top-rated financial
institutions wanting to raise funding in roubles.
Application will be made for the prospectus of the issue to be registered with
the Federal Financial Markets Service (FFMS). The EBRD’s decision to issue the
bond was registered by the FFMS on May 13.
Upon registration of the prospectus, the EBRD will apply for its bonds to be
listed and traded on the government bond section of the Moscow Interbank
Currency Exchange (MICEX) and for the Central Bank of the Russian Federation
to include them in its Lombard list. Inclusion in this list would allow EBRD
bonds to be used by bank investors for repo transactions with the Central Bank.
Citigroup and ZAO Raiffeisenbank Austria are the Joint Lead Arrangers of the
primary placement, with 10 other Russian and international banks participating
in the underwriting syndicate. Senior co-lead managers are ING, International
Moscow Bank and Vneshtorgbank; co-lead managers are Commerzbank, West LB, ABN
Amro, Gazprombank and HSBC; and co-managers are Deutsche Bank and JP Morgan.
Eight banks will be contributing quotes to the new MosPrime Rate. These are
ABN Amro, ZAO Citibank, Gazprombank, International Moscow Bank,
Raiffeisenbank, Sberbank, Vneshtorgbank and WestLB. This rate is set daily and
gives the rates at which contributor banks are prepared to lend money to
top-rated financial institutions for periods of up to three months.
The Calculation Agent for the issue, ING, will on a quarterly basis determine
the coupon rate for the EBRD bond. The coupon rate for the first three-month
period has been determined at 4.04 per cent per annum (Reuters page
EBRDRUBFRNRATE) and will be reset every three months in line with the then
prevailing MosPrime offered rates.
In order to ensure the consistency and credibility of the rate, the
contributing banks have agreed with the EBRD to quote firm rates – with their
bids not wider than 50 basis points below their offered rate quotations.
MosPrime rates are displayed daily on Reuters (page MOSPRIME1) and the NCA
website www.nva.ru The National Depository Centre (NDC) will act as the sole
depository for the issue.
This is an important milestone in our efforts to provide financing for key
projects which cannot rely on export revenues to repay foreign currency loans,
said Steven Kaempfer, the EBRD’s Vice President, Finance, at a Moscow news
conference called to mark the bond’s launch.
The EBRD has been tapping the local currency market in Russia for short-term
promissory note issues for some years but we have long been working with the
government and market authorities in Russia, especially the FFMS, Central Bank
and MICEX, to prepare access for foreign issuers including international
financial institutions to the longer-term rouble resources that the bond
market can provide, Mr. Kaempfer added.
We believe that this issue and the introduction of the new MosPrime rate have
the potential to make a major contribution to the development of Russia’s
capital markets, Mr Kaempfer said.
Charlie Berman, Co-Head European Fixed Income Capital Markets at Citigroup,
commented: “The EBRD has again demonstrated that it remains at the forefront
of the development of the local currency markets in the region. This
groundbreaking transaction in Russia has not only successfully opened the
Russian capital markets for other international issuers but established a
reliable money-market index in the domestic market, thus making another
substantial contribution to the development of the Russian financial system.
It is tangible proof of the Bank’s commitment to Russia and the sophistication
of its capital markets operations.”
Michel Perhirin, Chairman of the Board of ZAO Raiffeisenbank Austria, stressed
the importance of the introduction to the Russian market of the first floating
rate bond issue linked to a money market rate. He said: “Establishment of the
true rouble floater will further help the access of the Russian issuers to
long-term funding at competitive rates. He added that the EBRD paves the way
for many international and local issuers considering financing their
investment projects through Russian capital markets.”
Of the Bank's 27 countries of operation, Russia's is the single biggest target
of EBRD funding. Since its inception in 1991, the Bank has committed €5.87
billion to Russia in 212 stand-alone projects. As at the end of 2004, Russia
represented 24 per cent of the EBRD's outstanding portfolio.
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