Promsvyazbank early redeems the remaining Eurobonds in the amount of almost $ 190 million. The bank, which will soon serve the defense industry sector, risks facing severe sanctions from Western countries and therefore gives the opportunity to holders of its securities, including Russian, get out of them. At the same time, the liquidity of the bank is quite enough for redemption, and the proposed price, which is much higher than current quotes, is comfortable for investors.
On Friday, Promsvyazbank (PSB) announced an offer to redeem Eurobonds due in 2019. This issue of $ 250 million was placed in October 2016 with a rate of 5.25% per annum. Currently, there are securities in circulation for $ 188.4 million. The company offered to redeem the entire volume with a discount of 3% to face value. Applications are accepted until Thursday, and the results of the offer will be announced on Friday. "From time to time, the Bank uses these transactions as one of the tools for managing liquidity, which allows it to effectively regulate interest expenses on debt servicing," Promsvyazbank said. Repurchased bonds will be redeemed by the issuer.
In general, the bank does not maintain and did not previously conduct an active policy of wholesale funding. "The funds attracted from the issued debt instruments make up only 1.6% of its liabilities (21.8 billion rubles.) As of May 1, 2018. Accordingly, the bank is independent of either Russian or foreign public capital markets, "said expert" Expert RA "Yuri Belikov.
Early redemption of bonds is likely to be carried out within the framework of point-based measures to optimize the structure of the bank's balance sheet, analysts say. "Given the narrow specialization in the defense industry and state support, the development of wholesale funding is not yet seen as a promising and necessary direction. Therefore, unliquidated obligations that have remained since the time of past beneficiaries and top managers are closed due to excess liquidity, "Mr. Belikov notes. According to the latest published reports as of May 1, the highly liquid assets of the bank were 300.9 billion rubles, liquid assets - 720.9 billion rubles. "This step will save on interest payments.
In addition, redemption at a price below the face value will allow to reflect the positive financial result in the reporting ", - says Artem Argetkin, head of brokerage services department of key clients of BCS broker.
However, the decision may be connected with fears of expanding sanctions against the bank. The head of the temporary administration of the bank, Petr Fradkov, earlier said in an interview with Kommersant that for the PSB there are risks of falling under international sanctions due to servicing defense and sanctioning companies, so the credit organization is working out various scenarios for the development of events (see "Kommersant" on April 27) . In early May, Kommersant sources reported that the DPM is considering the possibility of securing the leadership to protect it from falling under personal sanctions (see "Kommersant" on May 7). According to Andrei Khokhrin, Deputy Commercial Director of Zerich Capital Management IC, PSB is afraid of freezing foreign assets and securities, and therefore is ready to redeem its Eurobonds. "Under conditions of the future transformation of the PSB into a bank for the military industry, there is a risk of getting under severe sanctions, and thus the bank gives investors a chance to get out of this paper," Mr. Argetkin said.
The proposal looks interesting for the holders of securities. Recently, this issue was not allocated with liquidity, and indicatively the prices were in the region of 93% of the face value, which is 4 percentage points lower than the buyback price. "Such an offer will allow large holders to withdraw from these securities, as the proposed volume of redemption is equal to the value of the entire issue," notes Mr. Argetkin. In his opinion, most investors will take advantage of this opportunity.