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Tuesday, February 03, 2009

Gazprom Offers Puts on Ruble Bonds for First Time

Feb. 3, 2009 (Bloomberg by Denis Maternovsky) -- OAO Gazprom will offer put options for the first time on 15 billion rubles ($414 million) of bonds, giving investors the right to demand repayment before the notes come due. Russia’s gas export monopoly is seeking to boost demand for the securities by adding the put option, according to Vladimir Bragin, a fixed-income analyst at Trust Investment Bank in Moscow. The sale will be in two parts later this year, Gazprom said in a statement posted on its Web site. “It seems that the high quality of the issuer and liquidity of the notes can no longer compensate” for a longer maturity, Bragin wrote in a research note today. A spokesman for Gazprom was unavailable for comment. The new issue market for ruble bonds has been all but shut to Russian companies since August as the currency declined 35 percent versus the dollar and investors shunned the securities as the economy weakened. Put options, introduced to lure investors to corporate bonds after Russia’s 1998 default, have forced companies to offer investors higher returns or face redemptions. The average price of ruble-denominated corporate bonds dropped to an all-time low of 78.34 percent of face value on Jan. 28, according to the MICEXCBI index. The index was at 78.71 today. Gazprom’s 5 billion ruble of notes maturing in 2014 are yielding 14.55 percent, according to prices on Bloomberg. That compares to 7.23 percent when the debt was sold in February 2007. Investors in Gazprom’s planned 5 billion rubles of five-year notes will have the right to redeem them after two years, while holders of 10 billion rubles of three-year bonds have the option to get their money back after a year, the Moscow-based company said. The company wants to sell as much as 35 billion of ruble bonds this year to finance operations, according to regulatory filings.

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