September 15, 2017 / 1:35 PM / in 10 months

Russian Railways steams back into Swiss

LONDON, Sept 15 (IFR) - Russian Railways returned to the Swiss market on Thursday with a six-year deal, taking advantage of investors’ appetite for yield to extend its curve.

The state-owned company is a popular issuer with Swiss private bank clients, who have a fondness for railways and also like the government ownership and support of the company.

The deal followed a roadshow on Wednesday, with initial price thoughts going out the following day at a coupon and yield of 2.1% to 2.35%, equivalent to mid-swaps plus 223.3bp-248.3bp. The SFr450m bonds printed at the tight end at a yield of 2.1%, or spread of 224.3bp over mid-swaps.

That final spread put the bonds slightly inside RuRail’s own curve, according to a lead, albeit its longest-dated outstanding in francs is the Feb 2021s, which were trading around swaps plus 188bp.

The level was also around 25bp inside Gazprom’s Swiss franc curve, whereas in other currencies the two generally trade at similar levels.

Buyers of the bonds were mainly banks and private banks with around two-thirds of the paper, while asset managers took 21.5% and pension funds 5%. The remaining 7.5% went to corporates and insurers.

Proceeds will go towards refinancing RuRail’s SFr455m 2.177% bond due in February 2018.

The bonds have a change of control clause with an investor put at par if Russian government ownership falls below 66.67%, if it does not appoint a board majority or if third-party ownership goes above 25%.

Credit Suisse, JP Morgan and VTB Capital were the leads. Russian Railways is rated Ba1/BB+/BBB-. (This story will appear in the September 16 issue of IFR Magazine)

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