Russia Approaches Banks in Step to Resuming Eurobond Salesby
Goldman Sachs among 23 underwriters asked to submit proposals
Ukraine sanctions have kept country out of markets since 2013
Russia asked Goldman Sachs Group Inc. and 22 other banks for proposals to organize a possible return to foreign debt markets for the first time since relations with the West soured to a post-Cold War low.
The last time Russia tapped international debt markets was in September 2013 to raise $6.8 billion, six months before President Vladimir Putin’s annexation of Crimea triggered sanctions from the U.S. and European Union that virtually closed the Eurobond market to Russian borrowers. The Finance Ministry sent its requests for proposals to 20 foreign banks, including the Bank of China and Goldman Sachs, according to a statement on its website.
“This isn’t a sign of desperation,” said Michael Ganske, who oversees $4.5 billion of debt and currencies as head of emerging markets at Rogge Global Partners in London. “They’re trying to get financing. At some point sanctions will be lifted. Banks can use this as an opportunity to establish connections with the sovereign for future deals with Russian corporates.”
While Russia itself wasn’t sanctioned, penalties against corporations and individuals over the separatist conflict in Ukraine curtailed access to foreign capital markets as Russia enters a second year of recession amid record-low oil prices and a widening budget deficit.
No decision has been taken on what form the debt may take or when or whether it will be issued, Finance Minister Anton Siluanov told reporters on Friday. Among the banks contacted were three local lenders, Sberbank PJSC, VTB Group and Gazprombank JSC, as well as institutions from Europe and Canada.
Russia’s four-part bond sale in 2013 included $3 billion of 10-year bonds that yielded 5.112 percent. The rate on those securities slid 1.98 percentage points in 2015 to 4.62 percent before falling to 4.57 percent by 6:50 p.m. in Moscow.
The yield premium investors demand to hold Russia 2023 dollar bonds is 300
basis points, compared with about 190 basis points at the time of their sale in 2013.
The country, which has budgeted for a placement of as much as $3 billion in Eurobonds this year, may see an opportunity to get back into the market following a rally in riskier assets on speculation the Federal Reserve will delay raising rates until 2017.
“I think this is opportunistic, given that there have been a few days of relative calm,” said Richard Segal, a London-based emerging-market analyst at Manulife Asset Management. “This is probably the earliest that proposals could be sent, given requirements for internal approvals and it seems to me more testing the waters than any need to sell.”
Other banks contacted were Barclays Plc, BNP Paribas SA, Bank of America Corp., Wells Fargo & Co., Deutsche Bank AG, Industrial and Commercial Bank of China Ltd., Credit Agricole SA, Credit Suisse Group AG, Landesbank Baden-Wuerttemberg, Morgan Stanley, Nomura International Plc, Citigroup Inc, Societe Generale SA, TD Securities Inc, HSBC Holdings Plc, RBC Capital Markets, UBS Group AG and JPMorgan Chase & Co., according to the Finance Ministry document.
“I see such a sale happening in the next few months,” Ganske at Rogge said. “We’re long Russia. We’d be interested if the price is good.”