Russia’s Gazprom Taps Eurobond Market Again with 1 billion Euro Deal

MOSCOW (Reuters) — Gazprom returned to the bond market Wednesday with a new 1 billion euro ($1.21 billion) Eurobond issue, Gazprombank said, in a sign of investor confidence in the state-controlled Russian gas producer despite tensions with the West.

The new bond deal comes just three weeks after Gazprom raised $2 billion also via a Eurobond issue.

Russia's relations with the West have deteriorated over the past few weeks after the imprisonment of the Kremlin critic Alexei Navalny, which has led to tit-for-tat expulsions of diplomats.

Gazprombank and J.P. Morgan are joint global coordinators and bookrunners of the issue.

Denis Shulakov, Gazprombank's first vice president, said the order book for the issue has generated more than 2.45 billion euros.

He added that 210 investors from Germany, Switzerland, France, Great Britain, and other European countries, as well as from Russia, and Asia and the Middle East have taken part in the issue.

Gazprom is leading the $11 billion Nord Stream 2 gas pipeline project from Russia to Germany, which Washington opposes. The project is under U.S. sanctions which have delayed its construction.

Despite the tensions, Gazprom placed an 8-year Eurobond worth $2 billion last month which attracted strong demand and investors have come back for more, shrugging off the political issues surrounding Russian borrowers.

Gazprom has set the final yield for the new issue at 1.5-1.55%, down from the initial guidance of 1.75-1.875%, as demand exceeded 2 billion euros for the 6-year deal, Interfax news agency said.

Fitch Ratings, which had assigned the proposed Eurobond a rating of "BBB", said Gazprom is expected to use the proceeds for general corporate purposes.

"Gazprom's strong competitive position in Europe is supported by low production cost, enormous gas reserves, and long-term contracts with take-or-pay provisions, which are, however, likely to become less prominent as legacy contracts expire," Fitch said.

Before its recent issues, Gazprom had last tapped the market in October, raising $1.4 billion in perpetual bonds at a yield of 4.6% and another 1 billion euros at 3.9%. It plans to raise a total of 512 billion roubles ($7 billion) both in Russia and abroad this year.

($1 = 0.8252 euros)


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