CREDIT BANK OF MOSCOW has closed its all-time largest deal in the international capital market
06.04.2017
29 March 2017 — CREDIT BANK OF MOSCOW (the «Bank») placed U.S.$600,000,000 7.50% 10.5-year subordinated (Tier II) loan participation notes through its special purpose vehicle CBOM Finance p.l.c. (the «Issuer») on the Irish Stock Exchange. The Eurobonds are callable in October 2022 and on every coupon date thereafter at the Issuer’s discretion. The Rule 144a / Reg S Eurobonds were issued to finance a subordinated loan to the Bank. The placement was preceded by a series of investor meetings in Hong Kong, Singapore, Zurich, London, New York and Boston.
This Eurobond issue is the first public international placement of subordinated notes out of Russia since November 2014 and is the Bank’s second international placement of that kind after the debut U.S.$500,000,000 5.5-year issue in 2013. The transaction was highly welcomed by international investors, including institutional investors, commercial banks and private banks, as witnessed by the broad geographic distribution of investors in the final order book: USA (36%), UK (20%), EU (15%), Russia (11%), Asia (11%), Switzerland (6%) and other countries (1%). It is worth noting the unprecedented demand from the USA and Asia, atypical for Russian banks’ capital funding transactions. Such strong demand was backed by the Bank’s successful history of international borrowings, high profile in the international community, stable financial condition, efficient business model and development strategy.
The demand for the new Eurobond issue was, in particular, supported by a concurrent offer to tender U.S.$500.000.000 8.7% p. a. LPNs due 2018 issued by the Issuer for the purpose of financing a subordinated loan to the Bank. Before the new issue’s order book was closed on 29 March 2017, the tender offer was wrapped up to reveal that the value of notes accepted for purchase was $393,795,000, i.e. 79% of the issue. The purchase of tendered Eurobonds is financed by the new Eurobond issue and, together, they are intended to improve the Bank’s regulatory capital structure. This is the Bank’s debut transaction of that kind, and the substantial amount tendered for purchase at 107.75%, just slightly higher than the pre-launch secondary levels, evidences that it closed successfully.
The order book for the new issue opened with a pricing guidance of 8% area, but the strong demand from investors who filled the book up to a record-setting amount in excess of U.S.$2,500,000,000 brought the rate down to 7.5%. In total, more than 200 orders were received from 32 countries of the world. Seeing investors’ enthusiasm about the transaction, it was upsized from U.S.$500,000,000 to U.S.$600,000,000.
It was a record-setting issue compared to similar transactions of privately-owned Russian banks since 2014. Being coupled with an offer to tender the subordinated Eurobonds due 2018, the deal became a one-of-a-kind international capital market exercise for the Russian banking sector.
The Eurobonds were rated «BB-» by Fitch Ratings.
Сitigroup, Credit Suisse, HSBC, ING, J.P. Morgan, Raiffeisen Bank International, Société Générale, Unicredit Bank and REGION Broker Company acted as Lead Managers and Bookrunners of the new issue. Credit Suisse Securities (Europe) Limited, HSBC Bank plc and Société Générale acted as Dealer Managers of the offer to tender the Eurobonds due 2018.