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