Amount: $500m
Maturity: Janury 2009
Issue price: 100.00
Coupon: 10.75%
Spread at launch: 753bp over five year UST
Launched: Monday November 25
Lead mgr: Citigroup/SSSB
Bookrunner's comment:
It is remarkable to note the speed with which we were able to put this transaction together. Having joint-led the recent Gazprom and TNK transactions, we were able to identify appetite very quickly. There was good demand, especially for this name, as Sibneft has been absent from the debt capital markets since the beginning of the year.
We have held the mandate for a couple of weeks, and although the company was prepared to go on a roadshow, we found that there was no need. We started bookbuilding on Monday morning, and by the end of the day we had gathered orders of $750m.
Sibneft chose the slightly unusual tenor of just over six years, maturing in January 2009, because it was keen to ensure that the payment date for the principal was far enough away from that of its other bond, which will fall due in February 2007. It also addressed market appetite for duration.
This is the longest non-sovereign paper out of Russia so far, and is Sibneft's largest standalone deal. It is the company's fourth bond, following a debut in 1997 and $400m of bonds earlier this year.
There has been a tremendous sea change in name recognition out of Russia, and for Sibneft in particular, thanks to the company successfully communicating its credit dynamics to the investor community. Sibneft was able to access the bank markets while the capital markets were closed earlier this autumn, but reacted very quickly once markets re-opened. This shows that the company's policy of cultivating its investor base does pay off.
By January next year, we expect to see seven year paper coming from the Russian blue chips, and the quasi-sovereigns may be able to issue 10 year dated bonds, as the sovereign still looks reluctant to borrow at the beginning of 2003.
The bond was distributed 41% to the UK, 27% to US offshore, 25% to Russian offshore, 2% to Switzerland, and 5% to others. Asset managers took 60%, banks 25% and retail 15%. Ninety accounts took part, of which 20% were new to Sibneft.
At the close of trading in London yesterday (Thursday), the bond was trading at 99.95/100.20.
Market appraisal:
"...the deal went very well. It came very quickly, and was a surprise, but we had a good order book and had no problems getting hold of the bonds. We view Sibneft as a fairly good and stable credit.
Emerging market conditions have generally been very good recently, which always helps.
We saw one or two new accounts, but in general it was the same investors who bought Sibneft earlier this year. There were a lot of German accounts, but you always know that there is also going to be a bit of Russia behind a deal like this.
The deal shows that if you are sensible on pricing, you can achieve a great bond."
"...the transaction went very smoothly. It is incredible to think that you can now turn around a deal such as this in one day without a roadshow, similar to credits in non-emerging market economies."
