Companies borrowed at a rate – Kommersant

In April, corporate borrowers increased activity in the domestic debt market. By the end of the month, issuers raised over RUB 500 billion. The increase comes against the backdrop of lower borrowing costs and tougher rhetoric from the Central Bank. In anticipation of an increase in the key rate, the activity of issuers will continue in the coming months, which have traditionally been weak due to the season of low business activity.

According to Cbonds, the total volume of ruble borrowings by companies in April amounted to almost 526 billion rubles, which is more than double the result of the same period in 2021. This is the best result for the month, the previous record was set in April 2019, when the companies raised just over 391 billion rubles. “We have witnessed an increase in issuer activity in April, especially at the end of the month,” said Denis Leonov, Head of DCM at BCS Global Markets.

The bulk of placements fell on companies in the real sector. They, according to the estimates of the chief analyst of the debt markets of the BC “Region” Alexander Yermak, provided about 54% of placements in April. Almost 42% were 90 issues of the financial sector. “About 18.3% was occupied by 71 issues of structural bonds, 4.9% fell on bonds of credit organizations. About 18.6% came from 10 issues of various financial sector issuers, including Dom.RF and Dom.RF news agency, leasing companies and others,” Mr. Yermak specifies.

The impressive results of April indicate that the key rate and credit spreads have stabilized at levels acceptable to borrowers, says Pavel Vintin, Director of Investment Banking and Capital Markets at Rosbank. By the end of April, OFZ yields with a maturity of two to three years fell by 25–35 bp. etc., up to 7.7–8.2%. They have not fallen this low since the fall of 2021. “Financial institutions that showed high profits in the first quarter are ready to take risks and actively lend to the corporate sector, including through participation in initial bond offerings,” explains Pavel Vintin.

Issuers’ activity was facilitated by fears of a possible increase in the key rate against the backdrop of tough rhetoric from the Central Bank due to strong pro-inflationary expectations. Following the results of the Friday meeting, the Board of Directors of the Bank of Russia did not change the key rate, keeping it at the level of 7.5%. At the same time, it was possible to discuss its possible increase at the next meetings. “Inflation remained low due to weak consumer demand, which supported financial conditions against the backdrop of a tough signal from the Central Bank,” said Arseniy Avtukhov, an analyst at Sovcombank’s financial markets analysis department. According to Denis Leonov, the fundamental motivation for issuers when entering the market is the cost of funding, which is why the monetary policy of the Bank of Russia has a huge impact on the behavior of issuers.

In the coming months, market participants do not expect a decrease in the activity of issuers in the debt capital market, despite the seasonal decline in business activity. According to Arseniy Avtukhov, market activity will continue until the start of the rate increase cycle, after which the number of new transactions will decrease. Along with inflation, growing geopolitical risks are an important factor for the local market. “These are unpredictable risks that can greatly change the market environment both in the short and medium-term planning horizons. We see that many investors are actively following the news agenda, fearing an escalation of the conflict in the spring and summer,” notes Mr. Avtukhov.

According to financiers, in the second quarter among the leaders of placements in the primary bond market will be companies in the financial sector, oil and gas industry and telecom industry, metallurgy and retail. These issuers, according to Pavel Vintin, are more in need of refinancing their current liabilities. “The overall picture can be supplemented by replacement bonds (see Kommersant dated April 28.— “b”), the share of which will continue to grow rapidly,” Vintin notes. In particular, Gazprom Capital alone has placed replacement bonds worth about $9 billion since the beginning of the year.

Vitaly Gaidaev