RussNeft is getting ready to float a bonded debt which will be the first one in its record.

RussNeft was established in September 2002. It is possessed by Mikhail Gutseriev and his partners. The company consolidates 25 small producing entities with total recoverable reserves exceeding 600 million tons of crude oil. Big international trader Glencore was a financial partner of Russneft when acquiring some of these assets. Last year RussNeft produced 10 million tons of crude. The company also consolidates a transport entity and a retail network of petrol stations, found in 13 regions of Russia and CIS. In 2004 the receipts of Russneft according to Russia’s standards of business accounting amounted to 27.4 billion rubles and its clear profit was 4.7 billion rubles. As of the 1st of January 2005 the liabilities of the company exceeded 28 billion rubles.
Yesterday RussNeft announced that it is getting ready to issue bonds to the amount of 7 billion rubles (nearly $240 million). The bonds circulation period is five years. The bonds are planned to be distributed by public subscription at MMVB face-value. Alfa Bank will be an underwriter and bond debt payer while National Depository Center will be used as a depository. As Vedomosti learned from Russneft representative Edward Sarkisov, the company decided to obtain borrowed funds in order to replace short-term credits by longer-term and less expensive ones; Russneft used to buy assets by drawing credits and now the company has taken the decision to indulge in restructuring of its credit record, he explained. He also pointed out that Russneft would not use this loan to do new purchases. But in the future the company will return to its policy of expansion. No comments have been made at the company regarding the dates of issue and expected rate. However the market participants assume that RussNeft will place the bonds before the end of the year, and the rate will be about 7-7.5%.
 “It is quite a high rate for the company that comes to the public capitals market for the first time and of whom investors know little,” said Mikhail Galkin, an analyst of Trust agency. He assumes though that Russneft will manage to obtain all the 7 billion rubles. “Some time ago the market was short of rubles,” said Galkin. “But now the market opportunities have impaired. The appetite of investors is going down, even more so when Russia’s market is in for big offers. Russian Railroads are going to issue bonds to 35 billion rubles, VTB to 30 billion rubles, telecommunicational companies to 15 billion rubles,” points out the expert.
Anton agency analyst Steven Dashevsky considerers it is clever of the company not to spend the new loan to buy assets. “The company has already made quite big acquisitions which exceeded its available funds. Moreover RussNeft must invest in upstream and infrastructure of new enterprises,” he said. “Therefore the issue of bonds in order to clear the old liabilities is a logical move on the part of the company,” concludes Dashevsky.
 “The bond issue will be called for because presently at the market there are not so many purely oil players,” agreed Mikhail Avtukhov, head of Soyuz Bank’s debt instruments department. “RussNeft is a young but noticeable player, besides for the time being nobody expects changes at the oil market. Therefore Russneft can float its debts for five years even without making an offer for early redemption of stock which is mostly three years,” ratiocinates Avtukhov. He also reminds that currently at the market there are several five year bond issues, Russia’s Railroads are going to place seven year issues, while some other companies are preparing ten year ones. In his opinion the company will decide to place the bonds before the end of the year.