World Economy

Foreign Investors Boost Russia Bond Comeback

Foreign Investors Boost Russia Bond ComebackForeign Investors Boost Russia Bond Comeback

More than 140 investors applied for purchasing new Russian Eurobonds, 55% of them banks, the Russian Finance Ministry said.

“Despite the informal recommendation of the US and the EU regulators not to purchase Russian bonds, demand on the part of foreign investors from different regions confirmed the high level of confidence of market participants in Russia as an issuer: the volume of the bid book exceeded the offer more than twice and reached about $7 billion. More than 140 investors applied,” Tass quoted the finance ministry as saying.

According to the finance ministry the main part of the issue (75%) was bought out by foreign investors from the UK, France, Switzerland, Asia and the US. The share of Russian banks, asset management companies and organizations that provide brokerage services, accounted for 25%.

New national infrastructure-based offering structure was tested during placement of Russian Eurobonds, the ministry said. Nevertheless, the ministry will continue to work with Euroclear and Clearstream.

“New national infrastructure-based offering structure was tested during placement of Russian Eurobonds. The Russian Ministry of Finance will continue active cooperation with Euroclear and Clearstream in order to complete the procedures for the conformity assessment of the new issue with the requirements to allow unhindered secondary circulation of bonds through these international clearing systems,” the ministry said.

For the first time a Russian company is going to operate the new placement—the National Settlement Depository that has a status of a central depository in the Russian Federation. The National Settlement Depository is a counterpart of the international clearing systems Euroclear and Clearstream and has all the necessary functionality to perform accounting and settlement of operations traditionally carried out by leading foreign banks.

On May 24, Russia’s Finance Ministry placed sovereign Eurobonds, first time since 2013. Securities for $1.75 billion in total were sold, while the demand was at $7 billion.

Moscow took the unusual step of holding its sovereign bond issue open for more than 24 hours in the hope of engaging investors from every timezone, despite substantial interest from domestic bidders.

The main stumbling block for global bondholders considering the sale had been the far-ranging reach of sanctions imposed by the US and EU in 2014 over Russia’s role in the war in Ukraine.

International investors had said they were perplexed by Russia’s decision to press ahead with its bond issue after failing to hire international banks to arrange the deal earlier this year, leaving VTB Capital, part of state-run VTB, the sole bank on the sale.