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Oct 12, 2016

JSC Russian Railways (RZD) completes several transactions on international capital markets

RU EN

On 11 October 2016, RZD finalised the settlement of its tender offer for outstanding Eurobond issues denominated in USD and CHF, and the placement of two new Eurobond issues denominated in USD and RUB.

These deals mark a successful return to the international capital markets after an absence of two years.

As a result of these deals, short-term Eurobonds maturing in 0.5 and 1.5 years and totalling an equivalent of about USD 680m were redeemed, and replaced with the new issues in the amount of USD 500m maturing in 4 years, and RUB 15bn maturing in 7 years.

The issues were placed on the international market using an LPN structure via the Irish SPV-issuer, RZD Capital P.L.C.

The transactions were part of Russian Railways' programme of credit portfolio optimisation aimed at reducing the Holding's currency debt exposure and balancing its repayment schedule.

* * *

The USD 500m issue with a 4-year tenor achieved the Company’s lowest-ever USD rate of interest at 3.45%. The issue was priced on the basis of an order book with oversubscription peaking at 8x times during book building, and achieved a tightening of over 0.5% from the initial guidance of 4.0%.

The success of the transaction was supported by the high quality of a diverse investor base. The geographical allocation of the investors on placement was as follows: the USA (offshore investors buying Eurobonds in accordance with Reg S US Securities Act of 1933) – 26%, the UK – 21%, continental Europe and Russia (qualified investors acting in accordance with the Law of the Russian Federation “On the Securities Market”) – 17% each; Asia – 12, and other investors – 7%

JP Morgan and VTB Capital acted as Joint Lead Managers and Joint Bookrunners.

* * *

The RUB15bn issue was the first Eurobond issue in Russia's national currency placed by corporate issuers since 2013. The 7-year tenor of this issue was also the longest for RUB-denominated Eurobonds since 2012. During book building, the Company was able to tighten the yield from the initial guidance of 9.5% to 9.2% – less than RZD’s local curve and less than a 1% premium to OFZ yields.

Nearly half of the placement was allocated to the largest international investment funds and management companies, who took 48% of the issue.

JP Morgan, Sberbank CIB and VTB Capital acted as Joint Lead Managers and Joint Bookrunners.

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