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. Last Updated: 07/27/2016

Vimpelcom Debt Float Raises $143M




LONDON -- Moscow cellular operator Vimpel Communications has became the first Russian company since the 1998 financial crisis to raise debt finance on international markets with a combined convertible bond and equity offering.


Vimpelcom sells its services under the BeeLine brand name.


Lead manager for the issue, UBS Warburg, said the size of the convertible offering Tuesday was $68 million, representing 2.515 million American Depositary Shares, and there was an option to increase the size of the deal by $7 million.


The simultaneous share offering was $75 million, priced at $21.625 per ADS, including the overallotment option.


Strategic shareholder Norway's Telenor is exercising its option to maintain its stake at 25 percent in the offer process, as is the European Bank for Reconstruction and Development.


"We think this was a good credit and it is cheap relative to [Vimpelcom's main rival] Mobile TeleSytems," said Jerome Booth, head of research at fund management company Ashmore Investment.


MTS at the end of June priced its U.S. share offering at $21.50 apiece in a $320 million deal, which valued the company at $2.1 billion, far in excess of the $780 million at which Vimpelcom had been valued at the time of the deal.


Vimpelcom's existing New York-listed ADS added $1.75 in early U.S. trade Tuesday to $23.375, a rise of more than 8 percent.


"The convertible was cheap and we like the equity upside," said Ashmore's Booth, whose Russian debt fund is the top performing bond fund in the world this year with a 106 percent gain.


Booth said Ashmore had been a buyer of Russian convertible issues, but declined to comment on whether it had bought this deal.


Under the terms of the Vimpelcom convertible offering, the bond will mature on July 28, 2005, for a final redemption price of 135.41 percent, to give an 11 percent yield to maturity.


There are two outstanding Russian convertible bond issuers, oil giant LUKoil and regional electricity company Irkutskenergo, but both of these were launched before the 1998 financial crisis.


Rating agency Standard & Poor's said in a recent commentary on Vimpelcom that it was rating the issuer CCC+, reflecting the sovereign risk of Russia.


It noted that Vimpelcom's earnings had suffered as a result of aggressive competition, with average revenue per user falling to $43 in March 2000 from a monthly average of $215 in 1998 and $99 in 1999 as the company expanded its lower margin prepaid business.


There is a raft of Russian overseas share offerings planned for this year, with the possibility that in excess of $1 billion could be raised as companies make a return to Western capital markets.


Until the offering from MTS, just $55 million had been raised from Russian share offerings to overseas financial investors.