OAO Ak Bars Bank is planning to sell what could be Russia’s biggest Eurobond since November by testing appetite among Asian investors, potentially ending a freeze in issuance linked to sanctions over the Ukraine conflict.
The lender based in the central region of Tatarstan is seeking to raise as much as $400 million of three-year notes with interest rates not exceeding 8.5 percent, according to a regulatory filing. Ak Bars is meeting investors in Hong Kong on Monday, Singapore on Tuesday and Zurich on Wednesday, according to a person with knowledge of the plan, who isn’t authorized to speak publicly and asked not to be identified.
Should Ak Bars raise the full amount, the offering would be the largest out of Russia since OAO Gazprom sold $700 million of one-year notes eight months ago. While bigger companies in can afford to stay out of international debt markets or look for alternative sources of funding, the resurrection in bond sales will come from smaller entities such as AK Bars that need to raise money now, Egor Fedorov of ING Groep NV said.
“This name is well known in a very narrow circle and it will likely be a club deal with with a small number of investors,” Fedorov, a fixed-income analyst at ING in Moscow, said in e-mailed comments.
Ak Bars hired UBS AG and Credit Suisse Group AG to manage the offering, which may be finalized next week, according to a second person familiar with the sale. The lender has $500 million of notes due in November, which yielded 3.50 percent today from a 2015 high of 17.46 percent in January.
While Ak Bars can repay the maturing debt with its own funds, it wants to take advantage of “favorable market conditions” to sell Eurobonds, Ak Bars press department said in e-mailed response.
The lender’s push to tap global markets comes after average yields on Russian corporate external debt dropped to 7.2 percent from as high as 13.6 percent in December, when plunging oil prices and a rout in the ruble sent investors fleeing from the nation’s assets. Ak Bars’ bonds due July 2022 currently yield 10.1 percent.
Foreign-currency bond sales by Russian companies on international markets fell to $214 million this year from $8.7 billion over the same period in 2014, and $28.6 billion in 2013, according to data compiled by Bloomberg.