Alfa-Bank successfully closes the book for USD 500 mln Basel III compliant perpetual subordinated Eurobonds

On January 25, AO «ALFA-BANK» successfully closed issue of USD 500 mln perpetual Eurobonds compliant with Basel III (Central Bank Regulation 395-P). The total amount of the subordinated loan will stand at
USD 500 mln, the first call option is scheduled in 5.25 years; the initial coupon rate for the first 5.25 years was fixed at 6.95% per annum (quarterly payment).

Alexei Tchoukhlov, Acting Chief Executive Officer, Deputy Chairman and Chief Financial Officer, said:

«We monitor the dynamics of the capital markets all the times very carefully and try to raise funds in the most favourable moments in terms of price. We have an infrastructure that allows us to react quickly to «window opportunity», similar to the one that was observed throughout January. We decided to take advantage of the favorable market conditions to place the instrument increasing the Bank’s Additional Tier 1 capital, and not only to increase long-term liquidity. This is extremely important for our growth strategy, which is based on strengthening our position of the largest privately owned bank for corporate clients and expanding our presence in the retail lending market. The issued amount fully corresponds to our medium-term plans for the Bank’s development, providing an additional capital cushion.»

In the beginning of the week we met with investors in London, Zurich and Geneva, and clearly understood that now the conditions for the issuance are optimal.

This deal once again confirms that the Bank has access to international capital markets at competitive rates even when issuing Additional Tier 1 instruments. The fact that the coupon rate was fixed more than 1% below the rate at which we attracted a similar subordinated loan in November-December 2016 indicates that our work in the past year, the role that the Bank plays in the Russian banking market, is positively assessed by investors.

The coupon rate of 6.95% is at record low level for all Russian banks, both private and public ones, to attract Additional Tier 1 capital in the Eurobond format. The transaction involved more than 75 institutional investors and large funds from Europe, Great Britain, Switzerland and Asia, Russian investors showed considerable interest.”

Demand exceeded the originally announced deal size by almost 2.6 times, that allowed us to fix the final rate by 0.3% lower than the originally announced price range.

After the CBR’s approval of the loan agreement the amount of the issue will be included in Additional Tier 1 Capital of Alfa-Bank. The Notes are issued by Alfa Bond Issuance plc. The issue was arranged under the Bank LPN Programme in RegS format. The Lead Managers are Alfa-Bank and UBS Limited.

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This announcement is not directed at retail clients (as defined in the Product Intervention (Contingent Convertible Instruments and Mutual Society Shares) Instrument 2015) in the European Economic Area («EEA»). The notes are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the EEA. For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU (as amended, «MiFID II»); or (ii) a customer within the meaning of Directive 2002/92/EC («IMD»), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (iii) not a qualified investor as defined in Directive 2003/71/EC, as amended (the «Prospectus Directive»). Consequently no key information document required by Regulation (EU) No 1286/2014 (the «PRIIPs Regulation») for offering or selling the notes or otherwise making them available to retail investors in the EEA has been prepared and therefore offering or selling the Notes or otherwise making them available to any retail investor in the EEA may be unlawful under the PRIIPs Regulation.

Solely for the purposes of each manufacturer’s product approval process, the target market assessment in respect of the notes has led to the conclusion that: (i) the target market for the notes is eligible counterparties and professional clients only, each as defined in MiFID II; and (ii) all channels for distribution of the notes to eligible counterparties and professional clients are appropriate. Any person subsequently offering, selling or recommending the notes (a «distributor») should take into consideration the manufacturers’ target market assessment; however, a distributor subject to MiFID II is responsible for undertaking its own target market assessment in respect of the notes (by either adopting or refining the manufacturers’ target market assessment) and determining appropriate distribution channels.

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