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Gazprom seeks to explore Switzerland with Russia’s first Eurobond this year

A Gazprom employee stands near to the new bitumen processor at the OAO Gazprom Neft oil refinery in Moscow, Russia, on Thursday, Sept. 20, 2012. OAO Gazprom Neft, the oil arm of Russia's state-run natural-gas producer, started operating a 3.2 billion-ruble ($100 million) bitumen processor at its Moscow refinery this month as it seeks to reduce pollution. Photographer: Andrey Rudakov/Bloomberg

Bloomberg

Gazprom PJSC, the world’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.
“They have tightened due to the good demand for the paper, and demand was high because the new issue premium was attractive,” said Lutz Roehmeyer, director at Landesbank Berlin Investment GmbH, which oversees about 11 billion euros ($12.2 billion) in bonds. “It offers a little pick-up compared to other Swiss bonds of Russian quasi-sovereign issuers.” 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 “mindful” 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.
Dwindling Sales
The yield on Gazprom’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 Russia’s role in the Ukraine’s conflict blocked borrowers’ access to international markets.
Gazprom, which isn’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 Russia’s biggest lender is willing to buy Russia’s Eurobonds and the nation has enough liquidity to place bonds domestically.

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