Promsvyazbank places eurobonds

Promsvyazbank places eurobonds

Published: October 30, 2012

Russian bank secures US$400mn in tier 2 capital deal.

Promsvyazbank (PSB) of Russia has raised US$400mn through seven-year subordinated eurobonds in its second tap of the capital markets in two weeks.

The bank will use the funds for on-lending to corporate clients as well as expanding its retail and SME lending businesses.

The bonds, denominated in US dollars and priced with a yield of 10.2%, will be included in the bank’s tier 2 capital. “We targeted US$300mn and a price range of 10.25%-10.5%, so we’re really satisfied,” Alexandra Volchenko, PSB’s CFO, tells EMEA Finance. “The size was bigger than we expected and the price was lower than our range.”

The deal follows a roadshow that took in London, Asia, Switzerland and, via conference call, the US. Although demand from the US was less than expected given the impact of Hurricane Sandy, Volchenko notes that the oversubscribed order book drew together private banks, asset managers and other institutional investors from Europe, the UK, Russia and Switzerland.

PSB has been a regular issuer in the eurobond market since a debut deal in 2004. Although the bank is privately held – and includes the European Bank for Reconstruction and Development as a stakeholder – Volchenko says that she and colleagues strive to run it as transparently as possible.

“We’re a private bank, but provide investor conference calls on a quarterly basis,” she adds. “Our IFRS statement is available, our management team is available for discussions. We believe this is important, to communicate with investors and let them know what is going on.”

The eurobond follows a trade-related syndicated loan of US$307mn and €72mn agreed earlier in the month. Both deals come in the wake of PSB’s recent decision to postpone an IPO in London until market conditions improve.

“The IPO could be a really important step – not from a capital point of view, because generally we’re adequately capitalised and have a significant capital cushion, but to develop the bank and its strategy, open new opportunities and provide an indicator of its value,” Volchenko says. “But it’s not the right time to be active in that market, and so we’ve postponed it until next year.”

Promsvyazbank, Bank of America Merrill Lynch, HSBC and JP Morgan managed the eurobond issuance.