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On 27 September 2021, MKB closed the book of orders for its new USD perpetual subordinated 350 mln Eurobond issue. The quarterly coupon rate was set at 7.625% for the first 5.5 years, and at the applicable UST Yield + 6.561% thereafter. The Eurobonds are callable in 2027 and on each 5th anniversary thereafter.
The subordinated debt meets the Basel III requirements and is expected to be included in full in the Bank’s Additional Tier I capital as soon as the Bank of Russia gives the relevant consent. The new Eurobond issue is MKB’s second dollar perpetual subordinated instrument placed since 2017.
A global call with investors from London, Geneva, Zurich, New York and Hong Kong resulted in an orderbook with a wide geographical coverage and prevailing international demand: the UK and the USA (26%), Switzerland (17%), other Continental European countries (20%). A notably strong demand also came from Asia and the Middle East (18%), the Russian investors' share was 19%. More than 60% of the issue was taken up by institutional investors: funds and asset management companies. The final book contained approximately 100 orders out of 20 countries.
The order book opened with price guidance of 7.875% area. The strong demand from investors, which peaked above USD 1.1 bln, resulted in 3x oversubscription, the price guidance was lowered twice to 7.625-7.75% and then to 7.625%. The final coupon is more than 1 percentage point lower versus the existing dollar perpetual issue (CBOM-perp USD540mn 8.875% AT1) which may be called in November 2022.
"The market conditions allowed us to tap the international capital markets for a third time this year with a subordinated instrument, which is more attractively priced for investors, and to build a diversified book of orders. We are satisfied with the offering results: the investment community once again demonstrated a strong appetite for MKB's issues and its comfort with the quality of the Bank's investment story and the level of its management", - commented Vladimir Chubar, Chairman of the Management Board.
This is MKB’s third transaction in the international debt market in 2021: the bank placed a senior 5-year EUR 600 mln 3.1% Eurobonds in January, and a senior 5-year USD 500 mln 3.875% Eurobond issue in September. Thus, the Bank once again affirmed its leadership in the Russian banking sector in terms of the size and number of public funding exercises in the international capital markets since 2014. It has currently ten outstanding Eurobond issues: seven issues totalling USD 2.7 bln, two issues totalling EUR 927 mln and one RUB 5 bln issue.
The notes are to be issued under Rule 144A/Reg S. The Eurobonds are expected to be rated “B-" by Fitch Ratings.
The issue was arranged by Citigroup, ING, J.P. Morgan, Societe Generale, Sova Capital, Emirates NBD Capital, Gazprombank and Renaissance Capital.
The securities to which this announcement relates have not been and will not be registered under the Securities Act and may not be offered or sold in the United States or to, or for the account or benefit of, U.S. persons (as such term is defined in Regulation S under the Securities Act), except pursuant to registration or an exemption from the registration requirements of the Securities Act. There will be no public offer of securities in the United States.
This announcement does not constitute or form part of an offer or invitation to sell or issue, or any solicitation of an offer to buy or subscribe for, any securities, in the United States or any other jurisdiction nor shall it (or any part of this announcement) or the fact of its distribution form the basis of, or be relied upon in connection with, or act as any inducement to enter into, any contract or commitment or investment decision whatsoever. The distribution of this announcement in certain jurisdictions may be restricted by law and persons into whose possession any document or other information referred to herein comes should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.
This announcement or information contained therein is not an offer, or an invitation to make offers, to sell, exchange or otherwise transfer securities in the Russian Federation to or for the benefit of any Russian person or entity and does not constitute an advertisement or offering of securities in the Russian Federation within the meaning of Russian securities laws. Information contained in this announcement is not intended for any persons in the Russian Federation who are not “qualified investors” within the meaning of article 51.2 of the Federal Law No. 39-FZ “On the Securities Market” dated 22 April 1996, as amended (the “Russian QIS”) and must not be distributed or circulated into Russia or made available in Russia to any persons who are not Russian QIS, unless and to the extent they are otherwise permitted to access such information under Russian law. The securities referred to herein have not been and will not be registered in Russia and are not intended for “placement” or “circulation” in Russia (each as defined in Russian securities laws) unless and to the extent otherwise permitted under Russian law.
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