Gold Silver Reports – Goldman Alum to Help Sell Debt From Places You’ve Never Heard Of – Raiffeisen Bank International AG wants to boost its ranking among global bond arrangers by opening up debt markets in countries some investors may be hard pushed to pinpoint on an atlas.
With a new hire from Goldman Sachs Group Inc. co-heading its Russian corporate and investment-banking unit, Raiffeisen is positioning for new deals in the former Soviet Union after the Vienna-based lender helped organize this year’s $500 million bond sale from Tajikistan. Central Asia’s poorest nation was so unfamiliar to the market that investor presentations started with a map.
“The post-Soviet space is clearly our region of interest,” Anatoly Shvedov, who joined the bank from Goldman in October, said in an interview at Raiffeisen’s Moscow headquarters. “We want to be one of the most active houses in the region.”
The lender’s aspirations have been supported this year by a surge in appetite for high-yielding debt as continued monetary stimulus in the developed world pushes investors to take on more risk in search of returns. The emerging-market dollar debt spread dropped to 2.33 percentage points this week, the lowest level in a decade, according to a Bloomberg Barclays index.
The Tajik bond sale, which was used to finance a hydro-power plant less than 150 miles from the border with Afghanistan, was more than six times oversubscribed. Another Raiffeisen-managed deal from the former Soviet Union this year — a $1.4 billion sovereign-bond sale from Belarus in June — received about $2.5 billion of bids.
Meet the ‘Stans’
With U.S. interest rates set to rise and stimulus fading in Europe, Raiffeisen’s window of opportunity could be short-lived. And there may be good reason why oil-rich Kazakhstan is the only one of the five former-Soviet ‘Stans’ to have issued Euro-bonds before this year.
The prospectus for the Tajik bond devoted 10 pages to laying out the investment risks, including that “one of the highest-volume illegal drug trafficking routes in the world” runs through the country. Uzbekistan and Turkmenistan came near the bottom of a 2017 ranking by democracy watchdog Freedom House and Kyrgyzstan has had two revolutions in the past 15 years.
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Credit risks are on full display in other parts of the former Soviet Union. Foreign investors were forced to accept a principal writedown on bonds of Azerbaijan’s biggest bank after a default earlier this year, while Ukraine restructured $15 billion of sovereign debt in 2015 after a conflict with pro-Russian rebels drained its reserves.
This year, Raiffeisen joined the top 10 banks organizing international debt sales from the former Soviet Union, climbing six positions from 2016, according to data compiled by Bloomberg. Shvedov says the bank’s 20 years of experience on the ground in Russia give an edge over U.S. and European competitors with operations based outside the region.
“We are well established in Russia, and Russia is well positioned as a hub for many activities in the post-Soviet space,” Shvedov said. “If there is a combination of factors that eventually leads to a potential issuance in the former Soviet space, then we are close enough to the situation to be a likely candidate.” – Neal Bhai Reports
