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Gazprom bond high note dips on reform

Gazprom’s recent Eurobond was something of a sovereign surrogate but investors and analysts worry that the money raised won’t do much to hasten the company’s reconstruction.

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PRESIDENT VLADIMIR PUTIN hosted a glitzy reception in the Kremlin in February to celebrate Gazprom's 10th anniversary. But the dinner for CEOs past and present paled in comparison to the boardroom revelry that must have followed a week later when the management of Russia's biggest company issued a $1.75 billion corporate Eurobond, the biggest in emerging-market history.

Investors couldn't get enough of the state-owned gas producer's paper. Gazprom had initially gone to market hoping to issue a $1 billion Eurobond with a yield to maturity of between 10.2% and 10.6%. In the end the bond was six times oversubscribed, allowing the company to raise extra money and driving the yield down to 9.625% priced at par.

In one go, Gazprom borrowed more than all Russia's companies put together had managed in the whole of 2002.

Russian corporate bonds have been all the rage in the past few months. With the rest of the world in a deep slump and yields in nearly every developed country at rock-bottom levels (and maybe set to fall further), Russia's paper has never looked more attractive.