On 27 October 2016, Alfa Banking Group successfully closed a USD400 mln Eurobond. It is the first-ever public issue of perpetual Eurobond of Russian issuer, which is fully compliant with the Basel-III requirements. The amount of issue is USD400mln, the first call option is in 5.25 years, and coupon rate was set at 8.00% per annum for the first 5.25 years (to be paid quarterly).
Alexey Tchoukhlov, First Deputy Chairman and Chief Financial Officer, commented the results: «This deal is unique for the Russian market. Since Basel-III introduction in Russia, no Bank had publicly issued perpetual Eurobonds. We have been working on the documentation very carefully in order to find reasonable balance between compliance with Regulatory’s requirements under Basel-III and investors’ interest in terms of investment appeal of the instrument. The main parameters, such as the amount and the interest rate, were extremely important for us, as this debt will be included in Tier I Capital of the Bank. The amount borrowed fully meets our mid-term development plans, providing a reliable capital cushion and the 8% coupon rate corresponds to our expectations as well,”
During the last six months the capital market experienced several ups and downs, and we decided to issue Eurobonds right now due to various reasons: Russian Rouble has appreciated against US dollar since the beginning of the year, short-term pressure on Brexit headline news has already weakened, nervousness on the markets has not yet reached its peak prior to the United States presidential elections. Apart from that, 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. As a result, due to significant investors’ demand after opening of the order book, we decreased the rate from the initial rate of 8.25-8.50% to acceptable rate of 8.00%.
This deal once again confirms that the Bank has access to international capital markets at competitive rates even when issuing innovative instruments. This is achieved primarily due to the high credit quality of the Bank, competent risk management, coherent strategy and clear ownership structure, as well as the role that the Bank plays in the Russian banking market.
After the CBR’s approval of the loan agreement the amount of the issue will be included in Tier I 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.