Oct. 27 (Bloomberg) -- OAO Lukoil, Russia’s second-biggest oil producer, plans to sell as much as $1.5 billion of dollar- denominated debt to international investors this week, according to people familiar with the transaction.

The Moscow-based company plans to split the offering into 5-year and 10-year maturities, said the people who declined to be identified because terms aren’t set.

“There’s definitely a lot of appetite for Russian bonds,” said Mikhail Galkin, a fixed-income analyst at VTB Capital in Moscow. “Inflows to emerging-market funds continue while dollar-bond supply from Russia is surprisingly very low.”

Lukoil seeks to become the country’s first privately owned company to sell dollar-denominated debt in almost 15 months. OAO Severstal was the last privately owned Russian company to sell dollar bonds when it raised $1.25 billion in July 2008, according to data compiled by Bloomberg.

Russian companies turned to local banks and ruble bonds after the global financial crisis blocked access to international debt markets to all but safest government-owned corporations. They raised $10.8 billion in foreign-currency bonds this year, compared with a record 611 billion rubles ($21 billion) of domestic notes, Bloomberg data show.

Almost $1 billion was invested in emerging-market bond funds during the second week of October, according to EPFR Global, which tracks fund flows and asset-allocation data. That’s the most since EPFR started compiling the information in 2001, the company said Oct. 20.

Lukoil spokesman Dmitry Dolgov declined to comment.

Lukoil Yields

The company’s new bonds may be “attractive” if they yield 6.5 percent for a five-year maturity or 7.75 percent for a 10- year note, Yury Tulinov, a fixed-income analyst at Trust Investment Bank in Moscow, wrote in a report to investors. The yield on Lukoil’s $500 million of notes maturing in 2017 fell more than 750 basis points this year to 6.56 percent, Bloomberg prices show. A basis point is 0.01 percentage point.

Lukoil may raise between $1 billion and $1.5 billion, according to Luis Costa, an emerging markets debt strategist at Commerzbank AG in London.

Executives are making presentations to bondholders in the U.S. and Europe until Oct. 28, the people familiar with the transaction said, and the sale may occur as soon as Oct. 29, the people said. Barclays Plc, ING Groep NV and RBS are underwriting the transaction.

OAO Rosneft is Russia biggest oil company.

To contact the reporters on this story: Denis Maternovsky in Moscow at dmaternovsky@bloomberg.net; Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net

Last Updated: October 27, 2009 18:33 EDT