CEE Bonds

Bahrain-based alternative asset manager Investcorp made its Swiss franc debut on Thursday afternoon, increasing the size of a five year deal in response to strong demand from retail investors drawn in by a juicy coupon.

The most politicised new issue for many years – Ukraine’s USAID-backed $1bn five year bond – could be followed by several more as the sovereign battles both the threat of civil war and a raft of redemptions this year and next. But lead managers run the risk of Russia shunning them on its rival future mandates, bankers have warned.

Montenegro sold a €280m five year bond this week, pricing its largest ever bond deal with its lowest ever coupon. After drawing €1.6bn in orders the notes were bid over three cash points higher in the secondary market on Thursday, with under allocated investors chasing paper in the secondary market.

Russian steel manufacturer Severstal kicked off what some bankers expect to be the first of a run of Russian asset liability management trades this week. Low cash prices and leftover Capex cash are prompting the country’s corporates to turn to tenders, they said, but a volatile and uncertain bond market presents problems for such exercises.

Severstal bought back $288m across its 2016 and 2017 dollar bonds this week, in an exercise some bankers expect to be the first of a run of Russian asset liability management trades. Low cash prices and leftover Capex cash are prompting the country’s corporates to turn to tenders, but a volatile and uncertain bond market presents problems for such exercises.

The Republic of Croatia will start investor meetings in Europe for a benchmark Reg S only bond on Monday (May 19).

With Russia’s annexation of Crimea and growing unrest in Ukraine causing concern among Western banks, UniCredit’s summed up the mood with a warning it was preparing for the worst European banks are “preparing for the worst” in the wake of Russia’s ill-starred annexation of Crimea and Moscow’s determination to foment unrest in Ukraine, a leading banker warned yesterday.

An imminent signing of a $500m loan by Uralkali, the world’s largest potash producer, has not convinced bankers that Russia’s frozen international loan markets is anywhere near thawing out The virtual closure of Russia’s international loans market in the wake of its annexation of Crimea in March looks unlikely to lift despite the imminent signing of a $500m deal by a leading commodity producer.

The decision by a joint venture between Russia and China to invest up to $2bn in key infrastructure projects will relieve the pressure on the Russian government to attract funds to offset the massive flight of capital.

Franklin Templeton is betting heavily on Ukraine’s ability to avoid full scale civil war, holding $7.6bn of the country’s bonds.

Following the success of Montenegro’s €280m five year bond, conditions are ripe for other Balkan and central European sovereigns to tap the market.

Warsaw is home to the largest CEE-headquartered stock exchange, Bucharest is rapidly trying to replicate the structure, while Vienna dominates the Central and Eastern Europe Stock Exchange Group. Throw the Moscow Exchange into the mix and the battle for the CEE power exchange will prove a fascinating one.