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Russian corporate bonds - this time it's different

* Russian corporates bring tight transactions

* Liability management helps unlock primary

* Macro events could tempt others

By Michael Turner

LONDON, June 10 (IFR) - A barrage of Russian corporate deals saw US$1.95bn of debt placed this week, and analysts reckon the stars are aligning for similar trades to tumble out of the country.

Shipping company Sovcomflot (Ba2/BB/BB) printed a US$750m June 2023 bond at 5.375% on Thursday, at the same time as steelmaker Evraz (B+/BB-) priced a US$500m January 2022 note at 6.75%. On Wednesday, fellow steelmaker NLMK (Ba1/BB+/BBB-) sold a US$700m June 2023 bond at 4.5%.

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All three companies issued debt to fund tenders.

"They all saw an opportunity to extend their debt profile and took it," said a lead on one of the trades.

They also took advantage of investors switching their positions to sell tightly priced deals.

Fair value on Evraz (LSE: EVR.L - news) was 6.8%-6.9%, according to one investor, indicating the new issue came 5-15bp inside.

NLMK came 10bp inside its curve, as well as pricing inside contemporaries Lukoil (Other OTC: LUKOF - news) and Norilsk Nickel.

Sovcomflot has not issued since 2010, making it harder to define fair value, but a lead said it was just as aggressive on pricing as its compatriots.

"It (Other OTC: ITGL - news) 's a different dynamic now," said a banker who led one of the deals. "Three or four years ago, Russian corporates were happy to pay concessions to build up investor bases, but not anymore."

"CFOs are under the cosh, and Russian companies are just looking to minimise the price."

BIG PRICE SWINGS

Evraz and NLMK moved pricing by 75bp from the wide end of initial guidance to the final yield, while Sovcomflot moved by 37.5bp.

"Investors weren't happy with it, but when we showed the issuers the books they wanted to be very aggressive," said the lead.

Evraz and Sovcomflot had books of around US$2bn, according to leads, while NLMK had US$4bn of orders.

This is after around US$2bn of demand fell out of the NLMK book after price cuts, according to a source. The bonds then struggled in the secondary, falling by more than three-quarters of a point, reflecting how hard leads pushed on pricing.

Some of the demand came from investors taking part in the tender offers.

Sovcomflot bought back US$652.7m of its 5.375% 2017 bonds, while NLMK repurchased US$311.4m of its US$800m 4.45% 2018 bonds and US$259.6m of its US$500m 4.95% 2019s.

ISSUERS TEMPTED

The trades have caught the attention of other issuers in Russia.

"We've had new messages from four or five issuers that we have been talking to for a while," said a lead on one of the deals.

But there's a sense of deja vu with these deals that puts a dampener on hopes for a rejuvenated Russian market, after previous bursts of issuance failed to prompt a wave of transactions from the country.

"A previous thawing that allowed Norilsk Nickel and Evraz to issue bonds late last year proved short-lived and investors are likely to remain cautious due to sanctions," said Fitch in a research note.

However, the incentive is there, the ratings agency said.

"A reopening of international bond markets for Russian issuers could significantly improve maturity profiles and reduce medium-term refinancing risk for companies with foreign-currency debt."

Corporates that operate in metals and mining, oil and gas and chemicals have the highest foreign currency debt, due to their large portion of dollar revenues.

And there's even the possibility that ECB corporate bond buying might have a knock-on effect, pushing investors towards Russia.

"It's started to slightly seep through," said an emerging markets syndicate banker. "I'm starting to see some Italian, Austrian and German investors who are usually quite conservative and only stay in Western European investment grade."

But Russians were still the big buyers of the latest deals, with 37% of Sovcomflot and 30% of NLMK going to local accounts.

Evraz only saw 13% stay onshore, but 46% went to Europe, with one lead highlighting that this includes countries that traditionally have a strong presence of offshore Russian money, such as Cyprus.

Deutsche Bank (LSE: 0H7D.L - news) , ING, JP Morgan and Societe Generale (Swiss: 519928.SW - news) ran the NLMK transaction, while Barclays (LSE: BARC.L - news) , ING, JP Morgan, Societe Generale, Gazprom and VTB arranged Evraz.

Citigroup (NYSE: C - news) , JP Morgan, ING, Sberbank and VTB were leads on Sovcomflot. (Reporting by Michael Turner; editing by Sudip Roy and Julian Baker)