Spread of RussNeft Bond-Equivalent Yield against That of Gasprom May Come to 130-150 Basic Points, Lead Bank Predicts

“Presently the spread of the first echelon oil and gas companies’ bonds against the yield curve of Gazprom comes to 130-150 basic points” the document says. “Considering a great number of capital issues scheduled for November-December 2005, growth in the yields of foreign currency bonds and scanty interest to new positions on the part of non-residents observed in the end of the year, we expect that RussNeft’s bonds will be floated with a spread against the securities of Gazprom, which is a benchmark of Russia’s equity market, at a rate of 130-150 basic points,” the Memorandum states.
An Alfa Bank representative explained to AK&M that to estimate tentative yields of RussNeft’s bonds, current quotations of Gazprom’s 2008 maturity bonds can be used, thus for the bonds of RussNeft a three year offer is stipulated for.
Since presently circulate the 2007 and 2009 maturity bonds of
Gazprom we can take the simple average of their yields. According to the Alfa Bank representative, last Friday 25th Nov. Gazprom’s 2007 maturity bonds were traded at 6.6% yield and those of 2009 maturity at 7% yield. Thus their simple average comes to 6.8%. If applied to RussNeft’s bonds one can expect that their yield will be some 8.1-8.3%.
As AK&M was told in Alfa Bank, Russneft bond issue is to be placed in the middle of December.
The representative of the Bank also said that the yield of the oil company’s bonds may affect the next month floatation of the bonds issued by other companies, such as Volgatelecom and RZD. “With many issues to be placed in November-December, estimated as approximating 100 billion rubles, and persisting instability, premium on primary distribution may come to 25-50 basic points, going up to 50-100 points in the moments of particularly hard pressure from international markets,”  it is pointed out in the Memorandum.
This is to remind that FSFM listed the debut bond issue by Russneft on the 25th of November of the current year. Altogether the company is going to place 7 million bonds in public subscription at a nominal value of one thousand rubles. The bonds circulation time is set as 5 years; the bonds will be placed at Moscow Interbank Currency Exchange, or MICEX, at a nominal value. Alfa Bank will stand as an underwriter and payment agent. The National Deposit Centre will be used as a depository. Payment of semiannual coupons is to cover the issue. The rate of the first coupon is to be determined by bidding on the date of placement and fixed for the period before the offer. Rates of the next coupons are to be set by the issuer.