Gazprom PJSC, the worldâ€™s largest natural-gas producer, is tapping the Swiss capital markets with the first foreign benchmark bond sale from Russia this year.
The state-run gas monopoly is offering 500 million Swiss francs ($505 million) of notes due Nov. 30, 2018 with a coupon of 3.375 percent, according to a person familiar with the deal who asked not to be identified because the information is private. The company began marketing the bond at about 3.625 percent.
â€œThey have tightened due to the good demand for the paper, and demand was high because the new issue premium was attractive,â€ said Lutz Roehmeyer, director at Landesbank Berlin Investment GmbH, which oversees about 11 billion euros ($12.2 billion) in bonds. â€œIt offers a little pick-up compared to other Swiss bonds of Russian quasi-sovereign issuers.â€ Landesbank bid for the bond.
The deal comes a day after an official at the European Union said that banks wishing to manage a proposed sale of Eurobonds by the Russian government, its first since 2013, must be â€œmindfulâ€ of the indirect risks of violating EU economic sanctions. With U.S. and Canadian advisers unwilling to participate in the sale, Russia is yet to issue a mandate for the bond. Switzerland is not part of the European bloc.
The yield on Gazpromâ€™s existing bonds in the same currency due in 2019 rose two basis points today to 3.67 percent. The rate on its euro-denominated note due in 2018 fell 5 basis points to 3.33 percent on Wednesday.
Gazprom was one of only a handful of issuers last year that collectively raised about $4 billion in dollar- and euro-denominated bonds. That was less than 10 percent of the record amount sold in 2013 before western sanctions over Russiaâ€™s role in the Ukraineâ€™s conflict blocked borrowersâ€™ access to international markets.
Gazprom, which isnâ€™t sanctioned, has seen its yields fall this year as appetite for Russian assets rebounded with recovering oil prices.
Deutsche Bank AG, Gazprombank JSC and UBS Group AG are acting as joint lead managers and Renaissance Capital as a co-manager, following investor meetings in Geneva and Zurich on March 14 and 15.
As for the Russian Eurobond issue, the Finance Ministry has contacted 25 foreign and three domestic banks with requests for proposal to organize the bond sale, according to information on its website. Herman Gref, chief executive officer of Sberbank PJSC, said on Tuesday that Russiaâ€™s biggest lender is willing to buy Russiaâ€™s Eurobonds and the nation has enough liquidity to place bonds domestically.