The EBRD today has completed the placement on Russia’s domestic market of a 1 billion rouble bond whose final return is linked to the performance of the DJ-UBSCISM (Dow Jones-UBS Commodity Index) over the bond’s five-year life.
The note is principal-protected and pays an annual coupon of 0.5 percent.
This is the fourth structured bond that the EBRD has launched on the Russian domestic market since September 2010 as part of the Bank’s commitment to developing local capital markets.
As with its previous rouble bonds, the EBRD will use the proceeds to fund its rouble lending programme in Russia, thereby minimising currency risks for its clients.
With this kind of instrument, investors are expecting gains on the commodities index to obtain a significant boost to their returns at maturity. There is no cap on the maximum performance of the DJ-UBSCISM while the floor has been set at zero percent.
The DJ-UBSCISM covers 19 commodities, thus potentially reducing volatility and offering a broad-based exposure - with no single commodity or sector dominating the basket. By linking the return to this index, the new bond offers a proxy hedge against inflation to a new class of long-term investors who can thus better match their liabilities.
The lead manager of the issue is the Moscow investment bank ZAO “IC Troika Dialog,” owned by Russia’s state savings bank Sberbank. The bond will be listed on Russia’s Moscow International Currency Exchange (MICEX) and cleared through the Russia’s National Settlement Depository, which will also act as the paying agent.
Today’s placement has been made through a closed subscription.
The EBRD has since 2005 raised a total of 81.3 billion roubles through 33 bond issues with an average maturity of 4.9 years. Of this, 40.5 billion roubles were raised on the domestic market through 9 issues with an average maturity of 6 years.