Norilsk Swoops Into Bond Market on U.S. Debt Deal: Russia Credit

OAO GMK Norilsk Nickel, the world’s largest producer of nickel and palladium, swooped into the Eurobond market after the U.S. debt-ceiling deal drove its yields to a record low.

Norilsk is selling $1 billion of seven-year notes with a yield of 5.55 percent, a person familiar with the offering, who asked not to be identified because the terms aren’t set, said today. The yield on its dollar bond due April 2018 fell 17 basis points to 4.48 percent at 5:43 p.m. in Moscow, the lowest since the sale six months ago. That compares with a rate of 6.49 percent for emerging-market metals and mining companies in JPMorgan Chase & Co. CEMBI Broad Index.

Emerging-market yields tumbled yesterday and Poland sold five-year notes in euros after U.S. lawmakers agreed on a deal to end a 16-day government shutdown and extend the nation’s borrowing authority until next year. OAO Gazprombank (GZPR), Russia’s third-largest lender, is also considering a euro bond sale, a person familiar with the lender’s plans said yesterday.

“Now that the shutdown is over we are seeing interest from buyers,” Konstantin Artemov, who oversees $500 million as a money manager at Raiffeisen Capital in Moscow, said by phone yesterday. “The news is positive for all risk assets. Appetite for risk has returned.”

S&P Boost

Standard & Poor’s lifted Norilsk’s outlook to stable on Oct. 7, citing a revised shareholders’ accord between Chief Executive Officer Vladimir Potanin and Oleg Deripaska’s United Co. Rusal on dividends that provided the metals producer with greater flexibility. Norilsk is rated BBB- at S&P, the lowest investment grade and one step below the sovereign.

It’s “important” for investors that the shareholders dispute is over, Tatiana Dneprovskaya, an analyst at UralSib Capital in Moscow, said yesterday by phone.

Petr Likholitov, a spokesman for Norilsk Nickel, declined to comment when asked by Bloomberg in Moscow yesterday.

U.S. lawmakers approved a deal to fund the government at Republican-backed spending levels through Jan. 15, 2014, and suspend the debt limit through Feb. 7. The news provided an “expected impetus” for foreign-bond sales, according to Alexander Sklemin, deputy head of credit research at Raiffeisen Bank International AG in Vienna.

‘Less Robust’

While primary market activity “could pick up,” it will be “less robust and less opportunistic than in the first half of this year,” he said by e-mail yesterday.

Russian issuers swept to market to take advantage of unprecedented stimulus from the world’s biggest central banks. OAO Lukoil, Russia’s biggest non-state crude producer, sold $3 billion of bonds in April in its first offering to international investors for more than two years.

The yield on Russia’s dollar bonds maturing in March 2030 fell three basis points, or 0.03 percentage point, to 3.83 percent today. The extra yield on Russia’s dollar debt over Treasuries fell one basis point to 214, according to JPMorgan indexes.

The Norilsk shareholders’ agreement adapting dividend targets to market conditions was “good news,” Egor Fedorov, an analyst at ING Groep NV in Moscow, said by phone yesterday. “The sale timing is quite good as the U.S. managed to avoid a default.”

To contact the reporters on this story: Mark Sweetman in Moscow at msweetman@bloomberg.net; Natasha Doff in London at ndoff@bloomberg.net; Yuliya Fedorinova in Moscow at yfedorinova@bloomberg.net

To contact the editor responsible for this story: Wojciech Moskwa at wmoskwa@bloomberg.net

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