Russian corporates prepare foreign debt blitz
Russian businesses are preparing to issue a blitz of foreign debt, despite financial sanctions that have all but closed the country’s access to international capital markets for the last year, according to the head of one of its leading banks, reports the Financial Times.
Igor Vayn, chief executive of investment bank Renaissance Capital, told the Financial Times his business was doing less domestic business and has allocated more resources to other geographies. But he indicated the “worst was over” for Russia.
“There are a number of companies preparing themselves especially on foreign currency side and they’re getting ready to issue new debt,” he said.
“There’s been a strong rally in Russian financial assets in the first six months of the year,” Mr Vayn added. “The fact that investors are ready to buy Russian strong corporate debt is indicative that most likely the worst is over.”
Renaissance Capital is owned by billionaire Mikhail Prokhorov, a Russian politician and former industrialist. Along with Sberbank and Citi, it has just closed a US$150m debt exchange for IMH, an exporter of pig iron and producer of merchant coke, which gave the Russian company an extra two years borrowing time on a bond.
Another bank, OAO Ak Bars, is working with Credit Suisse and UBS to try to raise up to US$400m in bonds in what would be the first foreign-denominated debt issuance by a Russian bank in six months.
“Interest rates are very low if not negative in many developed countries, that’s why people are looking for opportunities somewhere else, in this case Russia does present a very interesting opportunity for them,” Mr Vayn said.
He added that investors from Europe had been particularly active, most notably from the Swiss private banking sector. There has also been a “decent amount of activity” out of the US, he added.
Renaissance Capital plans to expand its team in the US and elsewhere. Growth in sub-Saharan Africa and other frontier markets is the main mandate of its newly appointed global head of investment banking James Friel, who was previously Rothschild’s Russian boss.
“For him to be efficient in that strategy, we understand he would need some additional headcount,” Mr Vayn said.
The bank also set up an office in Dubai a year ago, and plans to double headcount there in the next year, albeit from a low base of eight people.
Mr Vayn said there were strong arguments for moving RenCap’s headquarters to the emirate. “There are a lot of advantages there, the tax regime, easy to do business and so on,” he said. “We are analysing, if we do the move we would need to choose whether it’s London or Dubai.”
The prospect of the UK’s exit from the EU would not feature in the decision, Mr Vayn said, since it is “very very hard for us to assess the prospect of a 2017 referendum”.
“Irrespective of the outcome, London is going to stay as one of the most influential financial centres in the world,” he added.