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Debt capital markets: Sistema issue points to fixed-income recovery

After a troubled start to the year when defaults in the domestic bond markets occurred almost daily, there are tentative signs of a recovery in investor sentiment towards fixed-income offerings from Russian issuers. In late August conglomerate Sistema provided much-needed cheer for market participants when it successfully launched a R20 billion ($620 million) bond – the largest corporate issue to date this year, trumping an earlier R15 billion transaction from energy company Gazprom.

Thanks to strong demand from a mix of Russian and overseas investors the issue was able to achieve better-than-expected pricing. The deal, which was listed on the Moscow Interbank Currency Exchange (Micex), attracted bids from 174 investors, split 70% commercial banks and 30% asset managers. As a result the five-year deal, which features a put option after three years, was priced at 14.75%, 20 basis points lower than the initial price guidance of 14.95%. The final pricing was seen as particularly impressive given that the spreads on most first-tier and second-tier issues in the Russian bond markets had widened by 25bp to 70bp when the deal was marketed to investors.

According to Alexey Buyanov, head of the finance and investment group at Sistema, the company is looking to boost the share of rouble-denominated debt in its portfolio as well as the average maturity of its domestic bond issuance.

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