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. Last Updated: 07/27/2016

Eurobond Timing Under Debate

LONDON -- The potential coincidence of Russia's plans to launch a Eurobond and heart surgery on President Boris Yeltsin has raised debate over the timing of a series of key presentations to international investors that starting in November.


Yeltsin, 65, is impatient to have the operation as soon as possible, his wife Naina said Thursday.


Most leading emerging market analysts said Yeltsin was not the sole concern in the launch of the Eurobond, which has already been delayed by other factors, among them the June presidential elections in Russia.


They said Russia would naturally suffer a period of uncertainty if Yeltsin died, which would not make issuance easy. But the much-publicized Eurobond would still be feasible, even if its launch date had to be postponed again.


A Frankfurt based specialist on Eastern Europe summed up the general market view: "Russia is larger than Yeltsin. There are more people than one who are competent to replace Yeltsin."


If Yeltsin did die, Prime Minister Viktor Chernomyrdin would take his place and would have to hold an election within three months of Yeltsin's death, according to the constitution.


Meanwhile, an IMF delegation left Moscow this week without recommending the release of the latest disbursement of a three-year loan. A Russian Central Bank statement said the IMF was worried about low Russian tax collection.


An emerging market analyst in London said the news was bearish for Russian debt.


"But what makes the Eurobond valuable is the fact that Russian creditworthiness is essentially unaffected by short-term economic or political changes," the emerging market specialist said.


The Eurobond is Russia's first sovereign bond issue since the 1917 Revolution and is expected to be a five-year deal for up to $500 million. The expected spread will be in the mid-300 basis points over five-year U.S. Treasuries, London bankers said.


J.P. Morgan and SBC Warburg will be joint lead managers.


The two investment banks said in a statement Friday that Moscow will begin what are known as road-show presentations on Russia's economy in Asia, Europe and the United states on Monday, Nov. 11. The final presentation will be Nov. 20 in New York.


New-issues traders believe there is enough investor interest to support the Eurobond, which will be a benchmark for other Russian borrowers.


Moscow, St Petersburg and the Sverdlovsk region all have said they intend to tap the international capital market. There is thus pressure to launch Russia's Eurobond before the end of this year pave the way for the others, traders said.


"As with any debut issue, we are sensitive to underlying conditions," said one syndicate source close to the deal. He said at the end of the 10-day road show, market conditions would be assessed and a decision made on timing and other conditions.