Russia’s banks should be delighted that a foreign corporate issuer has printed a rouble denominated domestic bond for the first time. The deal opens up new business opportunities and makes for a more varied landscape in the Russian domestic market.
But in its short life so far, the bond issued this month by Uranium One and arranged by Gazprombank and Troika Dialog has picked up in the markets the unfortunate — and unofficial — nickname of “Kalashnikov bond”. Unsurprisingly, the name has been met with horror by bankers at home and abroad. They consider the name an insult to Russia and its investors.
Similar products around the world have been given kinder soubriquets: Samurai bonds from Japan, Dim Sum from China, Kangaroos from Australia and Yankees from the US. The origins of the names vary, but they are usually picked to give a positive spin. The Kalashnikov, the favourite assault rifle of guerrillas and terrorists worldwide, doesn't exactly do that.
A rebranding exercise is now underway. Troika Dialog likes the name "Sputnik" better. And as one of the largest rouble debt arrangers, its influence may well to be enough to get the change set in stone.
It is worth making the effort. A more fully functioning and varied domestic bond market — helping a country's growth and stability — should be a source of pride.
"Sputnik" probably fits that bill well. Sputnik 1 was the first artificial satellite to go into orbit, launched in 1957 by the Soviet Union and sending shockwaves through the US in the process. It burned up after three months, though. Bankers will be hoping the first Sputnik bond does not suffer the same fate — although foreign investors in Russia do still question the transparency and covenants put in place in that market.
It may be a while before others follow Uranium One, and not just because they don't want the Kalashnikov association. Brazil's Banco Itau has considered and rejected the idea. Bankers complain that the Russian domestic market is mainly interested in Russian names — Canada's Uranium One sneaking in by virtue of its 51% indirect Russian ownership.
The next deals will most likely come from big western banks with operations in Russia looking to tap the market, as they are well known enough to pass muster with the local investor base.
Deals may prove irregular and infrequent, but issuers should be encouraged to try and applauded when they succeed. Uranium One deserves to be remembered for more than just a name.