Vedomosti (Moscow) - March 26, 2008

A new phase

Russia saw the first placement of stock exchange bonds on Micex yesterday. Micex registered the first issue of stock exchange bonds back in August of last year when Pharmacy Chain 36.6 wanted to float an issue worth RUB 1bn (approx. USD 42.19m). Afterwards, Micex registered two more issuers, Avtovaz (10 issues for a total of RUB 10bn, or approx. USD 421.94m) and RBC Information Systems (eight issues for a total of RUB 12bn, or approx. USD 506.32m). The latter company went on to become a pioneer: RBC placed an issue of RUB 1.5bn (approx. USD 63.29m) organized by Alfa-Bank yesterday. The flotation started at 11 a.m. Moscow time, and, according to head of Alfa-Bank's investment division Eduard Kaufman, by 12 p.m. the bid book was already oversubscribed. All in all, 86 bids for a total of RUB 2.4bn (approx. USD 101.27m), or 159 percent of the issue, were filed during the auction, which closed at 1 p.m. Moscow time. The coupon rate is fixed at 12.25 percent per annum.

This year, some 10 more companies are likely to float their stock exchange bonds, General Director of Micex Stock Exchange Alexei Rybnikov expects. Generally, 74 companies are eligible for such issues, whose shares are included in Micex's quotation lists. Kaufman promises five more stock exchange bond issues before the end of the year. The Federal Financial Markets Service, in turn, is weighing the possibility of making the companies eligible without any listing for such issues, as Pavel Filimoshin, deputy head of the issuance securities department, announced. The law may be amended to this effect by the end of the year, Filimoshin explained.

The rate of 12.25 percent was much too high for a borrower of such quality as RBC, MDM Bank analyst Mikhail Galkin believes. "Had it gone for common corporate bonds, the holding could have secured a cheaper deal even in the current difficult situation," he said. According to Galkin's estimates, RBC's B+ credit rating assigned by S&P would put the bonds on the Bank of Russia's Lombard List, with the rate at just 10-10.5 percent. In his opinion, RBC had to pay extra for its debut with an instrument that was unknown to investors up until then. "It may very well be that they were quite aware of the excess payment for their title of the first stock exchange bond issuer."