The EBRD's rouble bond launched on Wednesday will not be a one-off, according to a senior official at the bank.
Steven Kaempfer, vice president, finance, says the multilateral hopes to return to the Russian market, possibly later this year, although the timing will depend on the speed and execution of its project finance pipeline in the country.
The bank became the first international borrower in Russia's local market on Wednesday, when it issued a five-year floating-rate bond raising R$5 billion. The money will be used to meet the growing needs for the renewal of Russia's municipal infrastructure, as well as the financing of small and medium-sized companies and other local borrowers with no or limited foreign currency income.
With the bank increasing its exposure to Russia there will be a growing demand for roubles from the EBRD's clients, says Kaempfer. "We have a significant pipeline of projects that require rouble funding – greater than the amount we borrowed through this deal," he says outlining the rationale for further rouble issuance. How quickly that pipeline is managed will determine when the bank next taps the market.
The multilateral's debut rouble bond, which was lead managed by Citigroup and RZB, was "in many ways an historic deal because it brings to fruition five years of hard work," according to Kaempfer. The transaction, he adds, "has the potential to open a new chapter in Russia's capital markets story."
The EBRD worked with the Federal Financial Markets Service, the central bank and the Moscow Interbank Currency Exchange to prepare the regulatory environment to allow foreign institutions to borrow in the rouble market.
As a pioneer of capital market development in the region, the bank also created a transparent benchmark for top-rated financial institutions wanting to raise funding in roubles.
The issue's floating-rate coupon is linked to the recently created Moscow Prime Offered Rate (MosPrime), a new money-market index launched under the auspices of Russia's National Currency Association. "It was a very important step forward to create a benchmark," says Kaempfer.
Eight banks will be contributing quotes to the new MosPrime Rate. This rate is set daily and gives the rates at which contributor banks are prepared to lend money to top-rated financial institutions for periods of up to three months.
The eight banks will also ensure consistency by quoting firm rates – with their bids not wider than 50bp below their offered rate quotations. The EBRD bonds should also become eligible for repo trading, where the tradeable bonds are repurchased at an agreed time and price. This would help add a liquidity management tool to the bank market.