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Russian petrochemical giant Sibur Holding has issued a $500m 5-year eurobond on the Irish Stock Exchange with the lowest coupon yield ever for a Russian corporate of 2.95%, on June 30, the company said in a press release.
Russia’s largest integrated petrochemicals company Sibur managed to take advantage of the high demand on international bond markets at the moment for high-quality corporate fixed income debt.
The irony of the current coronacrisis is that as central banks around the world cut their rates to near-zero, bond investors are once again on the hunt for bonds that are both safe and pay a decent return. The fixed income universe has shrunk as the global economy slows and risks have risen.
The eurobond follows on from ruble bonds the company issued in May that were also priced at a record low. Sibur successfully closed the order book for BO-01 and BO-02 exchange-traded bond issues, worth RUB10bn ($139mn) and RUB5bn ($69mn) respectively, on May 21, that pay the lowest ever corporate bond yields. Sibur’s final semi-annual coupon rate was fixed at 5.50% per annum, which is the lowest coupon among market placements by Russian corporate issuers historically, but still a decent return in the current environment. The par value of the bonds is RUB1,000 ($14.1) each. The offering price is 100% of the par value. With a coupon period of 182 days, the bonds have a tenor of 10 years and a put option after 2.5 years, the company said.
As Russia’s biggest player in the petrochemical business, Sibur has become an increasingly attractive asset. The company reported robust results in May that underline the strength of its business.
While the company’s revenues were down 7.8% year on year due to falling prices in ruble terms caused by the double shock of collapsing oil prices and the coronavirus (COVID-19) pandemic, the fall was cushioned by the completion of its ZapSibNeftekhim petrochemical complex (ZapSib) in Siberia, which bne IntelliNews profiled last year when it was nearly completed and is now online. The full impact of the increases the facility will bring to both the company’s revenues and its profitability are not yet fully visible in the company’s results, but will become increasingly noticeable as the year wears on.
Revenue were down due to a reduction in prices on the international market in ruble terms, especially in the midstream and the plastics, elastomers & intermediates segments, the company reported, but that was offset by a 30.4% y/y revenue growth in the olefins & polyolefins segment, driven by higher sales of polypropylene and polyethylene, which are produced by ZapSib, Sibur told bne IntelliNews.
While the coronacrisis has been a shock and has caused a lot of economic pain, as bne IntelliNews reported the bounce back from the March and April lows so far has been the strongest of the last five major crises (1998, 2001, 2008, 2016, 2020).
Russia has been in the vanguard of this rally as it is increasingly seen as a “safe haven” by investors thanks to its low debt and large reserves that have largely “crisis-proofed” the economy. The Institute of International Finance (IIF) reported last week that foreign investors are increasingly keen on Russian fixed income and the country now has the highest share of non-residents in the local public debt markets of any state in the world.
Quality corporate debt is equally appealing to increasingly yield-hungry bond investors, which is also facilitating a string of Eurobond issues from across the region to high demand. In just the last two days both Ukraine and Uzbekistan have also announced they will issue new Eurobonds.
The coupon on Sibur’s new bond will be paid twice a year and the proceeds will be used to optimise the Company’s loan portfolio and for general corporate purposes, the company said.
The bond was organised by Bank GPB International S.A., Citigroup Global Markets Limited, Goldman Sachs International, J.P. Morgan Securities plc and VTB Capital plc acting as the leading coordinators and bookrunners.
Demand was strong and the order book topped $1bn, which was taken up by 94 investors from around the world. The issue was rated Baa3 by Moody’s and BBB- by Fitch.
Alexander Petrov, member of the Management Board and Managing Director for Economics and Finance at Sibur, said: “The resilience of Sibur’s business and its growth potential are highly valued by investors, which is confirmed by the reaffirmation of the company’s investment-grade credit ratings from the three leading agencies. The record-low coupon rate at which the eurobonds were offered testifies to investors’ confidence in Sibur as a high-quality borrower."
Sibur is the leader of the Russian petrochemical industry and one of the largest companies globally in this sector, with more than 23,000 employees. The company’s unique vertically integrated business model allows it to create highly competitive products that are used in the chemical, fast moving consumer goods (FMCG), automotive, construction, energy and other industries in 80 countries worldwide.
The company has also implemented an environmental, social and governance (ESG) strategy and helps to reduce its CO2 emissions as it fixes associated petroleum gas (APG) in plastic products that used to be flamed off.
“In 2020, Sibur processed 22.6bn cubic metres of APG, thus cutting greenhouse emissions by 72mn tonnes, which is equivalent to the annual CO2 footprint of a middle-sized European country,” the company said. “In 2020, Sibur reported revenue of $8.2bn and EBITDA of $2.6bn. Over the past 10 years, Sibur has implemented a number of large-scale investment projects worth more than RUB1 trillion ($14.1bn). Each year, the Company spends no less than 70% of its EBITDA to finance its investment programme, while maintaining a balanced debt burden.”
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