Gazprom sold Eurobonds in defiance of problems with Great Britain

Gazprom placed eurobonds for 750 million euros despite the crisis in Russian-British relations because of an attempt on the ex-colonel of the GRU Sergey Skripal. Most of the securities were bought by European investors, including from the UK.
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On Wednesday, March 14, Gazprom placed eight-year eurobonds denominated in euros for € 750 million at a rate of 2.5% per annum, according to the Bloomberg terminal. Demand from investors exceeded the supply three times, at the peak its volume reached $ 2.3 billion. The placement was organized by Gazprombank, VTB Capital, Deutsche Bank, JP Morgan and Renaissance Capital.

On the eve of Gazprom held a roadshow in Paris and London - meetings with investors were held on 12 and 13 March. Initially, the benchmark yield was about 2.87%, the organizers were counting on the demand of € 2.25 billion, according to Bloomberg.

According to the first vice-president of Gazprombank Denis Shulakov, more than 120 institutional investors - investment funds, banks, insurance companies and pension funds took part in the placement. "Most of the demand was provided by investors from the European Union - they bought 70% of the issue. Another 8% were purchased by market participants from Switzerland, 5% from the UK, 3% from US investors, "the banker told Forbes. Russian market participants got about 13% of the issue.

Thus, the aggravation of the geopolitical situation and the negative information background associated with the attempted assassination of former Colonel GRU Sergey Skripal and his daughter Julia in the UK on March 4 did not stop British and other Western investors in buying the company's bonds, Shulakov sums up.

"Eurobonds are placed without a premium to the secondary curve, while among all the circulating Gazprom-denominated bonds denominated in euros, the narrowest credit spread was recorded in this issue," he added.

Gas attack

The placement of Gazprom's bonds took place in the midst of a heated crisis in Russian-British relations. Official London accused the Russian state of involvement in the poisoning of ex-colonel GRU Sergei Skripal, who worked for the British special services, and his daughter Julia, with the help of the nerve gas of the group "Novice", which was developed back in the USSR.

"After this blatant incident, we can not leave the relationship at the same level ... Therefore, we suspend all bilateral contacts at a high level, including withdrawing an invitation to Foreign Minister Sergei Lavrov," British Prime Minister Theresa May said March 14. The British side intends to expel 23 Russian diplomats from the country, as well as to cancel the visit of the Royal Family and officials to the World Cup in Russia.

In addition, the UK authorities promise to tighten the checks on private Russian aircraft and subsequently freeze Russian assets in the event that information appears that they could pose a threat to the security of the United Kingdom.

Earlier, Russian Foreign Minister Sergei Lavrov called "nonsense" accusations of Moscow's involvement in the poisoning of Skripal, but noted that Russia is ready to cooperate with Britain on this matter if London fulfills its part of the obligations under the Convention on the Prohibition of Chemical Weapons.

Outside politics

The results of the placement of Gazprom's Eurobonds fully correspond to market conditions and show that Western investors do not see serious risks in the deterioration of Russian-British relations, says Dmitry Postolenko, senior portfolio manager of Capital. "Russian gas will still be bought, therefore, in the eyes of institutional investors, Gazprom remains a reliable and high-quality issuer," the financier said.

Alexey Tretyakov, General Director of MC "Arikapital" agrees with him. "Political risks do not affect the quotes of Gazprom's bonds. Investors in recent years have developed immunity to statements about various geopolitical threats, and they are used to turning a blind eye to such statements, unless concrete measures are taken that could affect the company's financial condition, "he explains.

According to Tretyakov, the March placement does not look like a "club" deal, as the issuer reduced the yield on securities three times during the day, depending on the filling of the order book. As a result, the rate decreased from 2.875% to 2.5%. The expert recalls that Gazprom's previous placements also proved successful.

The company is attracting financing on the international market for the second time this year - in late February, Gazprom placed a five-year bond issue worth 750 million Swiss francs with a yield of 1.45%. In 2017, the company placed four Eurobond issues - 500 million Swiss francs, $ 750 million, £ 850 million and € 750 million. The yield of the latest issue, placed in November 2017, was 2.25%.