No Dollars Please, We’re Russian Borrowers

by **Ponee** Mon Jun 30, 2014 10:18 am

By Ben Edwards

Russian borrowers are slowly returning to the global debt markets.

Two things are different: no U.S. bank has yet helped sell their bonds, and none of the deals has been issued in U.S. dollars.

That statistic is unusual.

Between the start of 2013 and the Crimea crisis in March, U.S. banks had been involved in more than 90% of the 38 Russian deals that were denominated in either dollars, sterling or euros, and which raised at least $500 million, according to data provider Dealogic. Of those deals, about 80% were issued in dollars. Of the seven deals sold in euros, all but one had at least one U.S. bank managing the sale.

On Monday, Sberbank SBER.MZ -0.36% sold €1 billion ($1.36 billion) of five-year bonds, the first time it has issued in that currency. Then on Thursday, Russian peer Gazprombank also sold €1 billion of five-year bonds. Both deals followed a sale from Alfa Bank earlier this month, which raised an equivalent just shy of $500 million in euro debt through its holding company ABH Financial Ltd., ending Russia’s three-month exile from global bond markets. All three bond sales were arranged by European banks.

While that is a small sample of cases, some analysts think U.S. banks are still cautious about dealing with Russian borrowers amid the tensions with Ukraine and the lingering possibility of further sanctions.

“U.S. banks are reluctant to go out on a limb against the view of the (U.S.) administration just yet,” said Tim Ash, an emerging-market analyst at Standard Bank. “The Russians would have loved a U.S. bank on those mandates because they want to send a very clear signal that it’s business as usual.”

Mr. Ash reckons the fact European banks have been willing to arrange the Russian deals might encourage U.S. banks to participate next time.

Gazprombank and Sberbank both sold dollar bonds in February before trouble escalated in Crimea. Bank of America Merrill Lynch helped manage both sales, Dealogic data show. J.P. Morgan Chase JPM +0.24% & Co. helped manage the Gazprombank issue.

Bank of America Merrill Lynch and J.P. Morgan both declined to comment.

Other U.S. banks with prominent debt arranging teams that have previously sold Russian bonds, including Citigroup C -0.19% and Goldman Sachs GS -0.74%, declined to comment on whether they had been approached by either Russian borrower to manage the deals.

Borrowers often rotate the banks they hire to sell their bonds.

Sberbank and Gazprombank didn’t immediately respond to a request for comment.

Money managers also suggested that the decision to issue in euros instead of dollars could be a strategic move by the borrowers to bolster alternative sources of funding.

“It might be a signal from Russia that they’re not entirely dependent on going to dollar investors,” said Siddharth Dahiya, a fund manager at Aberdeen Asset Management ADN.LN -0.45%.

http://blogs.wsj.com/moneybeat/2014/06/30/no-dollars-please-were-russian-borrowers/?mod=yahoo_hs