MARKET SIGNALS 20.09.08
IDEA #1: VEON Holdings B.V.
Last week, a new placement took place in the ruble section of the Russian Eurobond market - the second issue this year was placed by VEON Holdings B.V., a subsidiary of the VEON telecommunications holding. 5-year Eurobonds for RUB 10 bln. were placed at 6.5%. Recall that in June this year the company also placed 5-year Eurobonds for 20 billion rubles with a coupon of 6.3% per annum.
The sector of ruble-denominated Eurobonds is usually somewhat overshadowed by investors' interest, which is due to the over-the-counter nature of trading in these instruments, as well as the high minimum lot (10 million rubles). State-owned companies play the leading role among issuers here: for example, Russian Railways and RusHydro have 5 and 4 issues in circulation, respectively. The private sector is represented mainly by 4 issues of Alfa-Bank (the market map and the list of ruble Eurobonds issued by issuers with Russian risk are given on pages 21-22 of this review).
It should be noted that one of the factors increasing the comparative attractiveness of ruble Eurobonds is the cancellation from 2021 of tax incentives for coupon income on OFZs and local ruble corporate bonds issued in 2017-2019.
The duration of the Russian ruble corporate bond market is traditionally small (about 3 years), in particular, due to the fact that many securities have put options. And this is not to mention the fact that the level of exchange liquidity of most ruble-denominated debt securities placed on the local market leaves much to be desired. In this context, the Eurobond, for example, Alfa-Bank maturing in January 2025, which does not provide options for early withdrawal and / or revision of the coupon level, in our opinion, deserves attention. Now on this security, you can fix the yield of 6.5%. Due to the fact that this issue was placed relatively recently - in January this year - the coupon for it is relatively small (6.75% per annum), which is important from the tax point of view. Thus, the low coupon / high yield ratio of Alfa-Bank's ruble Eurobond maturing in 2025 looks interesting in our opinion.
Joint Managing Director