Credit Suisse Group AG sold the first structured notes in two years tied to the debt of OAO Severstal, Russia’s second-largest steelmaker, and mobile carrier VimpelCom Ltd.
The bank issued $33.1 million of two-year credit-linked notes, the first such securities tied to Severstal since May 2011 and the first to reference VimpelCom since September of that year, according to data compiled by Bloomberg. Credit Suisse’s notes, which are tied to a basket of debt from different companies, are also linked to Kazan, Russia-based AK Bars Bank.
Sofia Rehman, a spokeswoman at Credit Suisse in London, declined to comment on the offering.
The notes were probably created for investors who are restricted from buying bonds of emerging market borrowers, Alexander Sklemin, deputy head of credit research at Raiffeisen Bank International AG in Vienna, said in an e-mailed response to questions. Sales of credit-linked notes tied to Russian banks and corporates totaled $275.8 million this year, with securities tied to companies including OAO Gazprom, OAO Rosneft and VTB Group, Bloomberg data show.
“VimpelCom and Severstal are leading companies in their sectors,” said Egor Fedorov, a senior credit analyst at ING Groep NV in Moscow. They both have a “strong credit profile and generate solid operating cash flows despite relatively high leverage in VimpelCom’s case and negative trends on global steel markets in the case of Severstal,” he said.
Credit-linked notes can have higher yields and tailored maturities that may not be available in the bond market. Buyers of the securities, which include private banks and wealthy individuals, suffer losses if there’s a default either by the bank issuing the note or the linked entity.
DZ Bank AG, Landesbank Baden-Wuerttemberg and Societe Generale SA led $27.4 billion of issuance of the credit-linked notes this year in Europe and Asia, little changed from the same period last year, Bloomberg data show. The securities are linked to the creditworthiness of companies and countries, from Italian utility Enel SpA to Sri Lanka.
Citigroup Inc. sold $50 million of 2 1/2-year notes tied to Severstal in May 2011, Bloomberg data show. Russian state-run lender VTB Group sold debt tied to VimpelCom in September 2011 when it raised 755 million rubles ($22.8 million).