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Vneshtorgbank distributed eurobonds

1 March 2004

On 1 December 2003, Vneshtorgbank distributed 5-year eurobonds for US$300 million at a 6,875% coupon rate. Eurobonds were issued subject to a newly approved programme to issue medium-term debt instruments for a totalount of US$2 billion. Moody`s и Fitch agencies assigned credit ratings to the issue at the Russian Federation eurobond level, that is, Baa3 и ВВ+, accordingly. Such offering is the first Russian issue of eurobonds at a fixed coupon rate having a credit rating of investment class.
Issue price was set at 100%. Deutsche Bank and UBS Investment Bank were joint arrangers of the offering. The transaction has the same structure as credit-linked notes issued by VTB Capital S.A., Luxembourg.
The issue was designed for both specialised investors purchasing emerging market bonds, and investors in debentures with a high credit rating, and had more expanded distribution geography. Over 50 investors from more than 10 counties took place in this transaction.
Over four days the management of the Bank headed by its President and C.E.O. Mr. Andrey Kostin held meetings with more than 80 European investors.
Vneshtorgbank is a leading Russian bank in foreign trade banking and the second in terms of capital and total assets. The Russian Government owns 99.9% of Vneshtorgbank`s shares.
Final offering terms reflect a higher return of US Treasury bonds than that at the start of the road show, which however enabled to distribute the issue with the least fixed coupon rate out of all eurobond borrowings ever distributed by Russian financial institutions. And the premium payable at maturity for Russian eurobonds was maintained at the same level as when the initial price benchmark was declared.
Main issue parameters are as follows:
- The first issue of eurobonds with fixed coupon rate having a credit rating of investment class;
- The lowest coupon rate out of all Eurobond issues with fixed coupon rate ever distributed by Russian financial institutions;
- Return and issueount were set to meet market conditions;
- A US$300 million strategic issue, considered as a launch of a new US$2 billion medium-term bond offering programme;
- Within the four-day road show, meetings were held with more than 80 investors from 5 countries; and
- The issue shows capabilities of one of the best Russian issuers to enter the market despite the instability, which prevailed as from October.

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