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Saturday, 18 November 2017

Swiss Franc Bond: Gazprom’s SFr500m six-year bond

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The giant comeback

Russian giant Gazprom returned to the Swiss market for the first time in four years in October 2013 with a blowout SFr500m (US$555m) deal which highlighted many of the market’s major features of year: the hunt for yield, popularity of corporate issuers and demand for emerging markets.

The company proved itself one of the world’s strongest emerging market credits, capitalising on great name recognition to hit every investor class. It was a far cry from the situation a few years ago, when only private banks and wealthy individuals would have invested in Russian paper.

The Baa1/BBB/BBB rated company squared the circle of issuance after earlier borrowing in dollars, euros and sterling. Only America Movil and a handful of other emerging market credits have such access across so many different markets. Following a roadshow, described by one lead as one of the best-attended of the year with more than 80 investors taking part, Gazprom printed the six-year well inside initial guidance.

Leads BNP Paribas, Gazprombank and UBS had pre-sounded the deal at the mid-swaps plus 205bp, or around 3%. That psychologically important 3% level was a great draw for many accounts, and books opened tighter at initial price indications of the 2.895% area or mid-swaps plus 195bp area. With demand near SFr700m, leads tightened even further to a final plus 190bp or yield of 2.85%, with pricing at par.

The deal came roughly 15bp through the outstanding secondary levels of Gazprom’s US dollar curve, and well inside where a new bond would print.

“For institutional investors this transaction was simply too important to miss,” said Manuel Gadient, head of DCM and syndicate Switzerland at UBS. “It’s scarce, it’s big, it offers value – what else do you want? I was therefore not surprised that most orders stayed in the book despite a 15bp tightening from initial guidance to final pricing.”

Compared with its sterling deal the previous month, which slashed 50bp from initial price thoughts to execution, the 15bp tightening was less radical.

Private banks and retail still took a majority with 58%, while asset managers took 27%, and other institutional the remainder.

“The deal satisfied all investor groups,” said Slaven Maligec, head of Swiss franc syndicate at BNP Paribas Zurich. “Russian credits are very welcome in the Swiss market.”

According to lead officials, there was little “air” in the order book and very few accounts limited or pulled orders at the tighter levels.

Even rival bankers could not manage a bad word about the new bond. “Despite the softer market, the deal went really well. It is definitely one of the year’s landmark transactions,” said one syndicate manager at a rival Swiss bank.

To see the full digital edition of the IFR Review of the Year, please click here.

To purchase printed copies or a PDF of this report, please email gloria.balbastro@thomsonreuters.com

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