CEE Bonds

Russian borrowers are making their presence felt in international capital markets. Two syndicated loans are expected to close this week, as well as a bond from a steel manufacturer. The sovereign is also eyeing up the the primary bond market, but the threat of further US sanctions still looms.

Rating: Baa2/BBB-/BBB

Novolipetsk Steel (NLMK) placed a $500m seven year bond on Wednesday inside its own curve and at its tightest ever spread to the Russian sovereign, according to a lead manager on the deal.

US Energy Secretary Rick Perry said on Tuesday that a sanctions bill restricting companies involved in Russia's Nord Stream 2 project would come in the “not too distant future”. That left investors wondering how and if this will affect their portfolios as bond bankers dredged up memories of when Nord Stream 1 was on track to print its own international bond through BNP Paribas before capital markets sanctions were imposed on Russia in 2014.

Novolipetsk Steel (NLMK)’s $500m seven year bond drew a book in excess of $1.5bn on Wednesday morning allowing leads to tighten initial guidance, which they said offered a 30bp new issue concession.

NLMK, the Russian steel producer, is likely to keep its approaching benchmark small and tightly priced, according to an investor who met with the borrower on Monday.

Russian Rail’s debut green Eurobond last week met with strong demand, but some investors had reservations about buying green bonds from a company owned by the Russian state and used to transport fossil fuels. Antonio Keglevich, UniCredit’s head of sustainability bond origination, responded to the criticism.

PKO Bank Hipoteczny has published its green covered bond framework which complies with the International Capital Market Association’s Green Bond Principles, the Climate Bonds Initiative’s standard for residential buildings and has a second party opinion from sustainability rating agency, Sustainalytics.

Slovenska Sporitelna is planning to market its first internationally syndicated Aaa-rated euro covered bond, which could be sold in benchmark size. The expected deal follows Slovak Vseobecna uverova banka’s (VUB) €500m five year which was one of the best performing trades this year.

Russian Railways launched the first international green bond from its home country on Thursday, a €500m eight year bond. While many emerging market investors were keen to look at the paper, despite the US considering a new round of Russian sanctions, several green investors disliked the company’s ESG enough to not participate.

The European Investment Bank (EIB) has moved its new Climate Awareness Bond (CAB) documentation beyond the eurozone with the sale of a Polish zloty bond to a single Japanese investor.

Ceske Drahy, the Czech national railway company, hit screens on Thursday announcing a euro benchmark, returning to the bond market for the first time in three years.