By Jason Bush
A debut Eurobond by Russian infrastructure company Global Ports is the latest sign Russian issuers are returning to the international bond market as investor appetite revives.
Bankers say the $350 million issue is notable because, although some well-known companies have returned to the market recently, this is the first Russian debut issue since 2013.
Bond issues from Russia used to be common but they ground to a halt in 2014, when the confrontation between Russia and the West over Ukraine caused investors to take fright.
Concerns about Western financial sanctions, which limit several large state firms from raising international finance, have dogged the Russian government’s efforts to return to the bond market.
Nevertheless, Russian companies not under sanctions have returned in recent months, among them miner Norilsk and gas giant Gazprom.
These heavyweights have now been joined by Global Ports, Russia’s largest operator of container ports, with revenues of $405.7 million in 2015.
“The market was really hungry for rather high-yielding Russian risk, on the back of good credit quality,” said Olga Gorokhoskaya, managing director capital markets, at Sberbank CIB, one of the arranging investment banks.
“You can hardly find anything in the double-B rating category that will bring you 6-7 (percent) in terms of yields.”
Rated BB+ by Fitch, Global Ports’ bond was issued at a yield of 6.875 percent.
It also helped that Global Ports was a listed company, without links to the government and with a large foreign strategic investor.
A unit of Danish transportation conglomerate Maersk owns 30.75 percent, the same as the core Russian shareholder N-Trans.
Although Global Ports’ business has suffered because of Russia's economic slump – in 2015 revenues slumped by 28 percent and the company reported a $33.7 million net loss – the container market is poised for a strong rebound in 2017-18, Promsvyazbank analyst Dmitry Gritskevich said in a note.
According to organising banks the bond was three-and-a-half times oversubscribed. Two-thirds of the demand came from outside Russia, including 20 percent from the U.S., 18 percent from continental Europe and 17 percent from Britain.
Sberbank CIB's Gorokhovskaya said that in an unusual sign of investor appetite, buyers were not just from the major financial capitals such as London and New York, but also Vienna and Amsterdam, which do not routinely feature on roadshow itineraries.
She said that although investors were not necessarily optimistic of a major thaw in relations between Russia and the West, they had grown used to the international political tensions and no longer took fright at them.