Alfa-Bank is the first Russian bank to issue mirror bonds
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The first Russian bank has approached the execution of the decree on the replacement of Eurobonds. Alfa-Bank has approved the issuance of relevant bonds maturing in 2025. At the same time, none of the Russian banks has issued replacement bonds yet. In total, issuers have four months left to place replacement bonds.
The Board of Directors of Alfa-Bank on September 1 approved two issues of replacement bonds, follows from the disclosure of a material fact. We are talking about the volume of issues for 15 billion and 10 billion rubles. maturing in 2025. Russian banks have not yet placed replacement bonds.
The Bondholders Association (ABO) estimates that only seven issuers have issued replacement bonds so far, among them – Metalloinvest, Sovcomflot, LUKOIL, Borets, Phosagro. At the same time, in May 2023, Russian President Vladimir Putin signed a decree obliging everyone who had Eurobonds to issue replacement bonds by January 1, 2024.
- The replacement bonds must be denominated in a currency similar to that of the Eurobonds.
- The Bank of Russia previously recommended that settlements on them be carried out in rubles, follows from a letter in January 2023.
- At the same time, according to the conditions, the size and term of payment of income, the maturity and nominal value of the replacement bonds must correspond to the similar conditions of Eurobonds, follows from the regulator’s letter.
Of the seven issuers after the decree was issued, only Phosagro has complied with it at the moment, the AVO specifies. “We believe that everyone who had Eurobonds is planning to execute the decree. According to our estimates, these are 17 issuers and 47 issues,” the ABO added.
Alfa-Bank told Kommersant that they are preparing to replace bonds in pursuance of a presidential decree. “This means that the terms of the replacement bonds will be similar, and the replacement will take place among investors who take into account the rights to securities in Russian depositories,” the bank explained. At the same time, “it is still difficult to talk about the specific time of replacement, since the issue documentation is still subject to consideration and registration with the Bank of Russia,” they added.
Plans to issue replacement bonds have also been previously reported by VTB, Tinkoff Bank, VK, Domodedovo, STLC (see Kommersant dated August 31). The MCB also previously stated that they were considering issuing replacement bonds. In addition, according to the Alfa Wealth Telegram channel, HCF-Bank also plans to replace Eurobonds.
The issue of replacement bonds is the most popular tool for unlocking investor resources for issuers with a capital of over 50 billion rubles. and a high credit rating, Anna Avakimyan, chief analyst at RegBlock, notes: this is strategically important “for restoring investor confidence.”
Financial expert Andrei Barkhota notes that Alfa-Bank has historically had a higher share of foreign currency assets compared to other major issuers. According to Expert RA, as of March 1, 2022, about 30% of the bank’s assets were denominated in foreign currency. The bank came under blocking US sanctions simultaneously with Sberbank in April 2022. As Mr. Barkhota notes, “large volumes of foreign currency corporate loans (Alfa-Bank.— “b”) demanded the issuance of Eurobonds.”
Alfa-Bank’s foreign currency bond debt accounts for about half of the volume (44.9%, or $2.1 billion, as well as 3.2% for yuan instruments), according to Rusbonds data.
“Legally, the issue of replacement bonds resembles the approval of an issue and the preparation of a prospectus for ordinary ruble bonds, but it is somewhat simplified due to the needs of issuers and the secondary nature of these securities,” concludes Mr. Barkhota.
In July, as in the previous month, the market for replacement bonds showed an increase in yields, pointed out The Central Bank in the latest review of the risks of financial markets. “Over the month, the yield of replacement bonds to maturity on the Cbonds index increased by 54 bp. up to 10.21%,” the review stated. Most of the replacement bonds included in the index are trading below their face value – their prices have fallen against the backdrop of a weakening ruble, the Central Bank explained in a review.
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