IFR 03.7.2020

STLC grasps the nettle

State-owned company pays big premium but locks in low coupon

State Transport Leasing Company hit three

goals as it printed its largest, longest dated

and lowest yielding Eurobond on Tuesday,

although it had to pay a healthy new issue

premium on a day of market turbulence.

Bankers away said the Russian state-

owned transport company paid a premium

of 40bp-50bp, though leads said it was 30bp,

after it chose to brave opening a CEEMEA

market which had shut due to coronavirus-

inspired volatility.

“Given where they started with IPTs, they

knew what the potential outcome should

be,” said a banker away. “They are probably

one of the very rare Russian issuers which

ACCEPTûBEINGûAûBITûMOREûmEXIBLEûONûPRICEv

STLC‘s pragmatic approach stood in

contrast to fellow Russian issuer EuroChem.

EuroChem had met investors on Monday for

its own bond, but had baulked at the levels

on offer, one banker said. EuroChem is more

price sensitive, said a lead.

STLC began marketing the seven-year

notes in the high 4s. Its longest bond was a

February 2026 bid at 4.16%, according to

Tradeweb. The US$600m March 2027s

landed at 4.65%.

“It was clearly a pretty hefty NIP, on top of

their outstandings having also widened

around 40bp since the February tights,” said

the banker away.

Nevertheless, the result matched the

company’s aim of securing a low coupon,

and STLC could also point to backing from

investors to the tune of US$1.1bn for the

offering.

h7EûWENTûFORûINTRADAYûEXECUTIONûONûTHEû

back of a stronger market that ended up

turning a number of times during the day and

came to a disappointing close which included

a Fed cut – everything you would wish not to

have,” said Dmitry Gladkov, acting global

head of investment banking and head of the

lNANCINGûGROUPûATû2ENAISSANCEû#APITALûONEû

of the leads and bookrunners.

Citigroup, Gazprombank, JP Morgan, Sova

Capital, Sovcombank and VTB Capital were the

other leads and bookrunners.

The volatility during the day was topped

off by the Fed announcing an emergency cut

of 50bp to calm markets. The move failed

and the S&P 500 soon slipped into negative

territory.

STLC had, though, been given the

CONlDENCEûTOûGOûAHEADûTHANKSûTOûSTRONGû)O)Sû

The books swelled with accounts from

continental Europe supplying 38% of the

orders, Russia 32% and the UK 25%.

The company is helped by the fact that

BECAUSEûITSûBONDSûAREûINDEX

ELIGIBLEûTHEYû

have a captive buyer base, although Gladkov

said that was not the only reason for

investors buying the credit.

h)NDEXûELIGIBILITYûHASûALWAYSûBEENû

important for STLC’s story but there are

other things at play,” he said. “They saw

three rating upgrades last year, which shows

a very positive credit trajectory.”

STLC is rated Ba1/BB/BB+. It was upgraded

by Moody’s, S&P and Fitch by one notch

during the course of 2019.

Robert Hogg

„ FRONT STORY CEEMEA

Issuers freeze as volatility takes hold

Belarus, EuroChem, DIB and Russian Railways all hit the brakes

A handful of CEEMEA issuers balked in the

face of unwelcoming conditions last week,

failing to follow up roadshows with deals.

The market volatility spooked BELARUS,

EUROCHEM, DUBAI ISLAMIC BANK and RUSSIAN

RAILWAYS (for its Eurorouble trade), although

NONEûOFlCIALLYûPOSTPONEDûTHEIRûISSUES

Nor did the CEEMEA primary bond

market grind to a complete standstill. While

Russian Railways kept the green Eurorouble

deal under wraps it sold a green Swiss franc

bond issue, while STLC paid up to access the

market on Tuesday (see separate stories).

From the CIS, EuroChem failed to appear

with a deal while Belarus leant on the

caveats in the language of its mandate

announcement, which said any placements

would come during the course of 2020.

4HEûSOVEREIGNSûlNANCEûMINISTRYûSAIDûITûWOULDû

issue Eurobonds this year, but the timing of the

placement would depend on market conditions.

A banker away from the deal was critical

of the leads. “Bad advice,” he said, referring

to the decision to announce the mandate.

“They pushed a high beta name out in the

WORSTûMARKETûSINCEûTHEûGLOBALûlNANCIALû

crisis. Yields on secondary and viability of a

trade are two different things.”

4HEû"ELARUSIANûlNANCEûMINISTRYûHADûSAIDû

in late February that it was considering

issuing US dollar-denominated Eurobonds

due in 2035 and euro-denominated

Eurobonds due in 2026 or 2028.

The Belarus US dollar 6.20% February

2030s are bid at 5.22%. That’s about 35bp

back of where they were trading in mid-

January but still 20bp inside the level at the

beginning of the year.

“We had the disclaimer in the

announcement, which was sensible given

the markets were not the most resilient

when we announced,” said a lead.

“The bad advice is to announce on a day

which is very volatile and misprice. The

issuer has done the investor work. The year

is still very young and they have ample

mEXIBILITYûTOûCONSIDERûWHENûTOûGOv

4HEûlRSTûBANKERûSAIDûTHATûTHEû"ELARUSûANDû

%URO#HEMûDELAYSûHADûDENTEDûCONlDENCEû

about lower rated trades.

“We need a highly rated, well-liked name

to come and print,” he said. “They’ll pay a

NIP. It has to trade well. Then we can start to

trickle down the credit spectrum again.”

But DIB, the largest Islamic bank in the

United Arab Emirates, also shelved its plans

for a dollar sukuk issue.

“DIB in sukuk – you’d think that would be

SOMEWHATûINSULATEDvûSAIDûTHEûlRSTûBANKERûh&ORû

them to postpone tells you where we are.”

A lead on DIB said that the bank had made

NOûOFlCIALûDECISIONûTOûPOSTPONEûANDûTHATûTHEIRû

delay related also to their reporting period.

“DIB could come, but the markets are

what they are,” the banker said on

Thursday. “Dow futures opened up 400pts

down today and the VIX is at 36. That sort of

volatility needs to subside for issuers.”

Robert Hogg

International Financing Review March 7 2020 55

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