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Russia: Rosneft baits the debt markets

$45 billion cash for TNK BP; Bond markets wait for more

Buy now while stocks last! That seemed to be the sales pitch in a $3 billion debut Eurobond from Russian state-owned oil firm Rosneft late last year.

Many expected a much bigger issue, especially after the order book reached $25 billion. At the front of everyone’s mind was an agreement, announced in October, to pay UK oil company BP $17.1 billion in cash for a 50% stake in BP’s Russian venture, TNK BP.

Rosneft registered a $10 billion Eurobond programme in November. But the message in the bond roadshow was that it would not necessarily return to the bond market in 2013. "Rosneft did a great job of reassuring investors it had diverse sources of funding, and that it didn’t immediately need the money," says one of the bookrunners.

Partly through curtailed supply, Rosneft priced to yield 3.15% for five-year notes and 4.2% for 10-year. This achieved an apparent aim of pricing lower than similar maturities at Gazprom. The state-owned gas firm has a lower debt-to-earnings ratio than Rosneft, and up to now has been a cornerstone issuer for regional DCM bankers.

Bridge loan

Bankers in Russia say there would have been little point pre-raising a much bigger amount, and then sitting on the cash.

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