COMMENT-Russians go east

Tue Apr 29, 2014 11:21am EDT

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LONDON, April 29 (IFR) - Flights from Moscow to Asia are suddenly filling up with corporate executives.

With Russian issuers shut out of the US dollar and euro bond markets because of events in eastern Ukraine, some are turning their attention further east.

Sberbank, Russia's biggest lender, was visiting investors in Singapore and Hong Kong last week with sole lead OCBC Bank. Bankers says Gazprom is another leading Russian corporate that has met Asian investors, while there are also rumours about Russian Agricultural Bank and diamond producer Alrosa.

One banker familiar with the situation says that the Russians are travelling beyond the main financial centres of Hong Kong and Singapore and have also been visiting India, Indonesia and Malaysia.

These meetings with investors are considered as "non-deal" roadshows; an opportunity for funding officials to keep accounts abreast of their latest news. But they also let these executives explore the possibility of a deal. Speculation is mounting that one or two of these issuers may try to sell a bond in the offshore renminbi or Singapore dollar market if interest can be stirred.

The idea, however, that a Russian borrower would do such a deal provokes two thoughts. First, would any bank risk arranging a transaction given the fraught political situation between Russia and the West.

While the raft of sanctions against Russian individuals and companies has been limited to President Putin's inner circle, they may widen if the crisis in Ukraine escalates further.

Would any bank, be it US, European or Asian, really want to risk damaging its reputation simply for the sake of a USD300m-equivalent Dim Sum bond?

The second issue concerns the Russian companies themselves. Are they that desperate for finance they need to issue in such niche markets? Presumably not. So what's the point? To show they have market access? Issuing in a small, regional, relatively illiquid bond market in Asia is hardly going to prove that.

Far better for these Russian issuers to visit their core investors in the US and Europe than spending time and money on a potential transaction that sends the wrong message. Unless it's the prospect of a few free days in Raffles or the Mandarin Oriental that's tempting them over.

(Reporting by Sudip Roy; Editing by Philip Wright)

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