CORRECTED-Opaque ownership clouds Borets International bond debut
(Corrects first paragraph to show Borets is a producer of submersible pumps)
LONDON, Sept 19 (IFR) - Russian submersible pump producer Borets International faces an uphill task bringing its debut bond deal to market, with the company's relatively unknown ownership raising some eyebrows among investors.
Borets is looking to raise at least USD420m through the sale of a five-year bond, which will help it finance a USD370m share buyback, the retirement of USD91m in credit facilities, and fees and other expenses, according to a copy of the preliminary offering memorandum seen by IFR.
The operation follows an agreement the company signed with its two main shareholders in late August, according to which Weatherford International will sell its entire 38.5% stake in the business, while majority shareholder Tangent Fund Limited is likely to end up with 100% of the company's shares.
Some investors evaluating the credit, however, are confused by the lack of disclosure regarding the owners of Cayman-based Tangent.
The preliminary memorandum describes the ultimate beneficial owners of Tangent as "two private individuals, each of whom owns a 48.965% interest in the fund", but invites investors seeking more information on their identities to call a number and contact Christopher Mackenzie, non-executive chairman of Borets International and a partner at Tangent Ventures.
A source involved in the discussions told IFR on Wednesday that the two individuals have been identified as relatively unknown Russian businessmen Gregory Stulbert and Mark Shabat.
Market participants offered different views as to how big an impact trying to identify Tangent's owners might have on the sale.
A source familiar with the transaction told IFR that the issue had become "a deal-breaker" for one or two accounts, but that other investors might just demand a higher risk premium.
"There are a lot of questions around the company, what it does, what the business is, how it has fared in cyclical downturns, how it does its financing," the source said. "The ownership has been flagged up by one or two people, but I don't have an answer for that."
Bankers not involved in the deal were puzzled by the language used in the preliminary memorandum, which they said was very unusual.
"That doesn't make it very easy to invest in a company, does it?" said a London syndicate official. "It is absolutely bizarre."
A fund manager, who did not attend the roadshow but who was working on the credit, said the lack of transparency was an issue but he would not necessarily rule out investing in the deal. "It is kind of an interesting story; I am trying to be open-minded," he said.
Christopher Mackenzie referred IFR enquiries related to the matter to the lead managers, who declined to comment.
Deutsche Bank, Morgan Stanley and Sberbank CIB are the lead managers on the 144A/Reg S bond. The notes are expected to be rated B1 by Moody's and BB by Standard & Poor's. (Reporting by Davide Scigliuzzo; Additional reporting by Abhinav Ramnarayan; Editing by Sudip Roy, Julian Baker and Philip Wright)
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