what is important to know about the paper, the issue of which is being prepared by the Seligdar holding

what is important to know about the paper, the issue of which is being prepared by the Seligdar holding

Turbulence in the global financial markets has increased investor interest in gold. Under the current conditions, the Seligdar polymetallic holding is studying the demand for bonds, the par value of which will be tied to the price of the precious metal. The coupon on such bonds will be lower than on the ruble debt of the same issuer, but the link to gold can protect investments from the weakening of the ruble. At the same time, it is worth taking into account the market risks of the precious metal, the credit quality of the issuer, moreover, it is more difficult to predict future cash flows for such securities.

noble protection

Recently, against the backdrop of growing turbulence in global stock markets, including due to problems with a number of US banks, investors have again begun to pay attention to gold as a defensive asset. According to Investing.com, the precious metal quotes on the global market approached the level of $2,000 per troy ounce, returning to April 2022 levels. On the Moscow Exchange, gold quotes approached the level of 4.9 thousand rubles / year, also updating the record since April last year. In less than two weeks, gold has risen in price by 9%. At the same time, since the beginning of the year on the world market (in dollar terms) the precious metal added the price is the same 9%, while in the Russian market (in ruble terms) it is more than 15% (due to the depreciation of the ruble).

At the same time, the precious metal does not generate interest income, so investors often prefer debt instruments as protective assets.

Last week, the Seligdar gold mining company began pre-marketing of GOLD01 series bonds, the par value of which is pegged to the cost of 1 gram of gold. Such securities have not yet appeared on the Russian market.

Settlements during the initial placement, payment of coupon income and redemption will be made in rubles based on the discount price of the Central Bank for gold. On Friday, March 17, it was 4,725.06 rubles per year. The placement will be arranged by Gazprombank and investment bank Sinara. The date of collection of applications, volume of placement, term of circulation, benchmark for the coupon rate have not yet been determined and will be established based on the results of pre-marketing and consultations between the issuer and the organizers of the placement, the interlocutors in the market noted.

Seligdar is one of the five largest companies in Russia in terms of gold reserves and one of the five largest in the world in terms of tin reserves. The company already has experience in raising funds linked to the value of the metal, more than half of its total debt falls on such a loan, which is repaid with gold of its own production.

“As of September 30, 2022, the monetary amount of the gold loan was estimated at 29 billion rubles, which is 54.3% of the total debt (53.5 billion rubles). The company, in fact, repays these obligations with its own products,” notes Alexander Shurakov, a leading debt market analyst at Otkritie Investments.

According to Yevgeny Vorobyov, Head of the Credit Analysis Department of Ingosstrakh-Investments Management Company, the issue of obligations in gold is a very good hedging tool for the issuer both from the volatility of the ruble and from the quotations of gold itself.

Decreased toxicity

A bond pegged in gold may be of interest to private investors who want to bet on the growth in the value of the precious metal. And taking into account the high toxicity of the dollar and increased devaluation risks against the backdrop of falling Russian exports, there are more and more such investors.

According to the Ministry of Finance last year, private investors bought 75 tons of bullion from banks, which is 13 times more than a year earlier.

“Given that gold is regarded as a protective asset, then the same properties will be in the “gold” bonds — the change in the body of the debt depending on the change in ruble prices for gold, plus additional coupon income,” notes Alexander Shurakov. As an analogy, OFZ-IN can be cited - government bonds with an indexed par value, which have a fixed coupon rate, but the body of the debt is indexed to inflation.

“In general, this issue can be viewed as an analogue of a structured product with capital protection, where the investor not only participates in the dynamics of the cost of gold and the ruble, but also receives a certain coupon income and knows the exact redemption date,” notes Evgeny Vorobyov

Collateral discount

However, investors should take into account that the yield on such bonds will be lower than on the ruble debt of the same issuer. According to Stanislav Kleshchev, an investment strategist at VTB My Investments, earlier Seligdar indicated a probable target of 4-5% per annum for its gold bond.

PSB Banking and Financial Markets Analyst Dmitry Gritskevich does not rule out that against the backdrop of high investor interest in issuing bonds in gold, the final placement rate will be below 4% per annum.

At the same time, the company currently has a ruble issue of Seligdar1R in circulation, the coupon rate for which is about 11% per annum. However, rates on securities with collateral are traditionally lower than securities without it. “In world practice, the most striking example of similar bonds is the sovereign gold bonds of India (rate 2.5% per annum) and Turkey (rate 1.5–3% per annum),” notes Stanislav Kleshchev.

Unstable course

However, in such investments, one should keep in mind the high volatility of precious metal quotes. So, in the last three years, gold quotes on the world market have changed in a fairly wide range - $ 1.7-2 thousand per ounce. Moreover, the upper limit was exceeded for two short periods: in August 2020 and March-April 2022. At the same time, in 2017-2019, most of the time, quotes were in the range of $1.2-1.4 thousand per ounce, only by the end of the period they approached $1.6 thousand per ounce. A comparable movement in gold prices occurred on the Russian market. In particular, in 2021, the precious metal quotes on the Moscow Exchange remained in the range of 4–4.5 thousand rubles per year, which is lower than the current values.

Like classic papers, gold bonds will have risks associated with the credit quality of the issuer. But, as analysts say, Seligdar has fairly high ratings from three Russian rating agencies. At the end of November last year, the Expert RA rating agency confirmed the issuer's credit rating at ruA+, with a stable outlook. “As a rule, issuers with a higher level of creditworthiness are used as protective instruments,” Evgeny Vorobyov believes. At the same time, it should be taken into account that, due to the uniqueness of the instrument, liquidity in the secondary market will most likely be lower, Mr. Vorobyov believes.

In addition, it is difficult to predict future cash flows for such an issue, because the issue's redemption and coupons will already depend on two variables - the ruble exchange rate and the cost of gold. “Investors who want to buy currency risk can consider the option of replacing bonds in foreign currency, the yield on which is already comparable to the yield on ruble bonds. Investors who want to invest in gold can buy gold itself through depersonalized metal accounts or buy physical gold,” the expert notes.

Vitaly Gaidaev

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