Results 2015: Russia in the capital markets – from intensive care to a regular room


Moscow. December 28. In 2015 the main task for Russian companies and bankers that work with them on the capital markets began to adjust to a new reality – the times a multibillion-dollar offerings in the past, life in the sanctions regime in the background is a little predictable geopolitical events have forced issuers to look for new solutions.

Two years ago, Eurobonds were one of the easiest ways to attract cheap financing, but now the placement of debt securities in the international market has become a luxury accessible only to a limited circle of borrowers. Companies, placed under sanctions, can not occupy, for objective reasons, but even those not imposed any restrictions during the first half of the year was preparing to test the new borrowing conditions.

In a non-standard format worked and the capital stock market: to replace a rare but large-scale IPOs that come small in size, but on the IPO and SPO came to an unusual large number of issuers.

The IPO market: often, but not enough

Equity markets, which usually recovers after shocks are much longer than the debt markets in 2015 has suddenly become the main platform on which life support for investment bankers and investors.

However, a single major occupancy for the year did not take place – even such names as “Lenta” and “Magnit”, not tried to draw at one time more than $250 million.

The first money in February came “the Magnet” – the company, securities which investors have traditionally considered among the most promising on the Russian market, easily have collected the bid book in just a few hours.

Sold paper Lavreno Limited, affiliated with the main shareholder of “Magnet” Sergei Galitsky. More than 75% of the placed during the SPO shares of the company were acquired by investors from the UK and USA, this result for the current “sanctions” times can be considered an unconditional success.

As a result of placing Lavreno received about 9.8 billion rubles, borrowed funds Galician planned to send to third-party projects – he owns the football club “Krasnodar” and funded the construction of a stadium for him.

After a month the success of “Magnet” repeated another retailer, Lenta, with the same ease the gathering of the bid book under the secondary placement. “Tape” drew the money for yourself – share capital the company needed to improve balance and Fund expansion. The retailer has managed to attract $225 million, most of new Depositary receipts of the company, as in the case of the “Magnet” bought foreign funds.

But one placing “Tape” is not limited. In October the company raised another $150 million in the SPO through the procedure of fast data collection applications.

In addition to speed of placement of the securities and a high demand among foreign investors, all three of accommodation unites another factor is the presence among investors Russian direct investment Fund (RDIF). In the “Tape” RDIF acted as the anchor investor, together with middle Eastern, Asian and Western funds. The names of the Russian co-investors, the Fund did not disclose. But, according to sources in the market, fall in SPO together with the RDIF paper “Ribbons”, including buying sovereign Fund of Qatar (QIA).

Not without the state Fund and SPO “the Magnet”. But in this transaction were not directly RDIF and Russian-Chinese investment Fund (RCIF created by the RDIF and China Investment Corporation). RCIF and involved in the main private placement of the year: the Fund buys a minority stake in the retailer “Detsky Mir” at AFK “System” more than $100 million This deal should set the benchmark for the company’s value before IPO. “System” was going to carry out IPO’s on the London stock exchange in the spring of 2014, but the Ukrainian events have disrupted this plan. The new schedule for the IPO of the retailer can be held in the spring of 2016.

But not only well known to the investors names were noted on the equity market in 2015. Despite the fact that all year the markets were unpredictable and dependent on multiple and sometimes unexpected factors (associated mainly with geopolitics), a number of companies still managed to “catch the wave” and to spend, ultimately, a good, though small in size, IPO.

The start of the Russian IPO gave placement United wagon company (UWC) in April. In June, the market tested the Moscow credit Bank (ICB) speaking about the plans for a public listing of its securities more than one year. In December, IPO conducted two company – specializing in auto leasing services “evroplan” Michael shishhanov and “Novorossiyskiy Kombinat KHLEBOPRODUKTOV” (NHCP), and ICD has placed an additional issue in the SPO.

All placements took place on the Moscow exchange, the largest IPO managed to hold ICD – Bank attracted some 13 billion rubles. and this amount is extremely small compared with, for example, conducted in late 2013 IPO of TCS Bank, managed to impress the investors to the extent that the order book on paper is not the largest Russian Bank amounted to nearly $11 billion (about 800 billion rubles at the current exchange rate).

“Placement for us $200-300 million is the amount that the market could handle at an acceptable price conditions. To spend a placement of $1 billion, you need to attract quality demand by several billion dollars, which in the current circumstances is extremely problematic due to lack of interest from foreign investors,” – explains Elena Khisamova, head of equity capital markets “VTB Capital”, took part in the preparation of all earlier this year, the IPO and SPO of Russian companies.

The title of the most dramatic accommodation of the year can claim NCHP. Owned United grain company and Summa group, the plant was able to close the order book only in the fifth set. The Issuer not much luck with the news accompanied by the closing of the transaction took place against the background suddenly broke out of the Russian-Turkish conflict, and many investors have started to delay decision making about the participation in the transaction. But the story ended happily for all parties, NCHP was able to sell a security at a price close to the maximum and attract more than 3 billion rubles.

Next year the market activity of the share capital must grow at the expense of privatisation deals. The government promises to sell at least one major asset – based Sovcomflot. “If the Earth falls off its axis, then we expect the privatization of “Sovkomflot” in 2016,” he promised in December, Deputy Finance Minister Alexei Moiseev. However, the final decision on the sale of state assets is still not accepted by the Ministry of Finance, bankers do not expect to sell the state-owned company can be as easy as a private asset.

“If we’re talking about pure privatization, when the state that it sells in its own name, all will be very difficult. Foreign investors purchasing state-owned enterprises, will certainly be thoroughly analyzed, aren’t they violating thus any prohibitions imposed under sanctions,” says the investment banker from a major international Bank.

The fireworks at the end of the year

Unlike equity markets, the Eurobond market this year experienced one of its most difficult periods – the majority of Russian borrowers actually refused from placement of debt securities on external markets, preferring Bank loans and ruble bonds.

In the first half of the year in the market, which until recently was the most attractive way for Russian companies to raise money, was not noticed any of the Issuer from Russia. In June a small issue of Eurobonds placed by the group “coke”, but this deal was actually a restructuring of existing debt, not new.

Only in July to enter the market suddenly decided the Bank “AK bars”, which placed Eurobonds on $350 million But the borrower of this level at all desire can pave the way to market to other issuers, therefore, after the placement of “AK Bars” on the market of Eurobonds expected there was silence again.

Only at the end of the year, bankers and investors waited for large IPOs. In October, with several days at once two Russian companies have placed a major Eurobond issues. MMC “Norilsk Nickel” has returned to the market after a two year hiatus with the release of 7-year Eurobonds for $1 billion Gazprom last placed Eurobonds in November 2014 have placed new debt securities by EUR 1 billion.

Eurobonds of both companies were in great demand among investors. “They just broke”, is the most popular feature of these two deals from investment bankers.

In November the baton from corporate picked up Alfa-Bank, easily sold Eurobonds worth $500 million at a very attractive rate of only 5% per annum. Finally, in December the market went Evraz – company with a rather high leverage, the placement of which had yet to a period of instability in world markets, but even amid falling shares of resource companies, the Issuer was able to attract through Eurobonds of $750 million.

In 2016 the situation on the Eurobond market for Russian companies will largely depend on foreign markets, the Ministry of Finance. The placement of sovereign bonds should motivate Russian companies to actively use the markets of external loans, especially as rates for many of them have returned to acceptable levels, as confirmed and occupancy in late 2015.

Russia did not go to external capital markets since autumn 2013, while traditional borrowing limit of $7 billion in the budget for 2016 was reduced to $3 billion. However, the placement of even a small volume of the issue of sovereign Eurobonds is able to “fire” at the very least, a major Russian issuers.

OFZs-IN: “I would have sold it for them”

The Ministry of Finance, in 2015, has again left investors without new issues of Eurobonds, offered them a new tool instead of the internal loan – bonds linked to inflation (OFZ-INF).

First placement of these securities was made in July, the Finance Ministry sold 8-year bonds for 75 billion rubles for the price of 91% of face value, suggesting that exactly half of the planned amount of 150 billion rubles. The new paper has caused a real stir in the market, the demand for them amounted to about 200 billion rubles.

“We as organizers knew that the bonds linked to inflation, first of all, interesting to pension funds, as their goal is to “beat” inflation. Relative to other categories of investors we had a certain skepticism: banks prefer instruments with yield “rate plus”, and foreign investors, according to preliminary data, expect to see a higher return than Russian investors”, – told in an interview with the head of the capital markets Department of Sberbank CIB (one of the organizers of the placement) Anton Malkov.

But in the end, he said, foreign investors had the greatest influence on placement, acting as drivers of pricing for them OFZs-IN was the opportunity to hedge not only against inflation but also against foreign currency risks.

Foreigners got 26% of the total volume of placement of debt securities, the emergence in the transaction of American, European and Asian buyers were so impressed by the Ministry of Finance, the Minister Anton Siluanov said about the full return of the Russian Federation on the international capital market.

But not only foreigners lined up for inflation OFZ. “Seeing the conditions that the Ministry of Finance put when placed, I would have sold and the portfolio would be put in there. No one expected this, it is very difficult even to explain why, and why it was made. We asked about 10 billion, only 4 billion”, – admitted to journalists the Director of Department of trust management of Vnesheconombank Alexander Popov.

Paper for the remaining 75 billion rubles, the Finance Ministry sold at auction in October-December. The first two auctions, as first placed, was held in the presence of high demand, and only in December there was a “misfire”: the Ministry for the first time are unable to sell all declared volume of bonds linked to inflation because of low demand, when there is a planned proposal to 20.4 billion rubles were sold only on paper 13.6 bn market Participants associate the first failure with the possible lack of funds from the criminal code and the NPF at the end of the year, as well as an adverse external conjuncture.

However, even with the not very successful latest placement, the Ministry managed to sell almost all planned for 2015 amount of new securities.

In 2016, investors will have one new bond, the Finance Ministry promised to spend on the Moscow exchange OFZ placement, denominated in RMB, equivalent to $1 billion.