Russian companies could issue three times as many Eurobonds this year as investor appetite returns after three torrid years linked to the Ukraine conflict, bankers and analysts say. Investors have snapped up more than $2 billion of Russian corporate Eurobonds so far in 2017, including those of aluminium giant Rusal and gold producer Polyus, marking a relatively strong start to the year.
Banking sources say many more companies are preparing to come to market in the coming weeks and months. "The window for placements by Russian issuers is open without doubt. Foreign interest in Russia is very high," said Andrey Solovyev, head of debt capital markets at Russian investment bank VTB Capital.
Russian debt is attractive for overseas investors partly because of the high yields it offers compared to Western instruments. Foreign investors had been underweight Russian bonds but have in recent months been adding to their positions. Egor Fyodorov, a debt analyst at ING Bank in Moscow, said Russian companies could issue $30 billion of Eurobonds this year, versus $12 billion in 2016 and just $3 billion in 2015.
That would still be some way off the $50 billion or so that Russian firms issued annually in 2012 and 2013, prior to the imposition of Western sanctions over Ukraine in 2014 and the economic slump that followed. Bankers say issuance this year will probably come mainly in the first half of 2017, as firms will be keen to place bonds before the US Federal Reserve raises rates and makes borrowing in dollars more expensive.
Another factor supporting issuance is that much of the Eurobond debt issued in the boom years of 2012-2013 will come due over 2017-18. Sberbank CIB analysts estimate there will be around $52 billion of Eurobond redemptions over 2017-2018, with around half of that debt issued by companies that are not under Western sanctions. Sberbank CIB's head of debt capital markets Olga Gorokhovskaya said: "Very favourable market conditions have formed, and it's not certain whether these possibilities will remain in the medium term."