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. Last Updated: 07/27/2016

Gazprom Lifts Notes Ceiling Up to $30Bln

Gazprom has doubled the maximum ceiling for borrowings under its loan participation notes program to $30 billion as it continues buying new assets.

Gazprom, one of the country's heavily indebted firms, said in its bond prospectus, obtained Friday, that its debt under the LPN program would at no time exceed $30 billion.

The previous prospectus, prepared for a bond issue in May, said the limit was $15 billion.

The new prospectus was issued for investors ahead of Gazprom's road show of a benchmark dollar-denominated bond, which is due to start in the United States on Friday.

"There have been rumors the bond could be postponed, but at the moment the signals are that it is going ahead," a banking source in Moscow said.

Many bond issues have been postponed in recent weeks due to market volatility, including the one planned by heavily indebted state oil major Rosneft, which this week scrapped a multibillion-dollar issue just after finishing a roadshow.

Sources have said Gazprom will stick to the bond plan despite global credit markets' turmoil over worries about U.S. subprime mortgages and their potential impact on the wider economy.

The outlook for the bond was also soured by a diplomatic dispute between Moscow and London although Russian officials have said it will have no impact on the financial sector.

Gazprom's debt stood at $31 billion as of the end of last year, but it continued expensive acquisitions throughout this year, including spending $7.45 billion on buying half of the Sakhalin-2 project from Shell.

It also spent over $2 billion buying control of Moscow city power utility Mosenergo as well as $625 million on a share in Belarussian pipelines.

In 2006, Gazprom spent 38.7 billion rubles ($1.52 billion) on debt-servicing interest, up from 30.95 billion in 2005 and 19.46 billion in 2004.

Gazprom will likely sell $1 billion to $2 billion of dollar-denominated eurobonds in the week beginning July 30, a person familiar with the offering said.

The person declined to be identified because terms are not set. Gazprom hired ABN Amro Holding and Morgan Stanley to manage the sale, which they began marketing Friday.

Gazprom is rated A3, or the seventh level of investment grade, by Moody's Investors Service and BBB, or two rungs lower, by Standard & Poor's.

The gas monopoly last sold floating-rate notes in dollars March 26, when it issued $700 million of three-year debt that floats at 90 basis points more than the three-month London interbank offered rate, according to data compiled by Bloomberg. Three-month Libor, a borrowing benchmark, is currently 5.36 percent. A basis point is 0.01 percentage point.

Gazprom three weeks earlier issued $1.3 billion of 6.51 percent bonds due in 2022 that priced to yield 195 basis points more than 10-year Treasuries.

The yield on the company's 8.625 percent notes due in 2034 has dropped 2.82 percentage points since the high reached three weeks after they were issued in April 2004, according to Bloomberg data. Moody's raised Gazprom's rating to investment grade eight months later. S&P did the same in October.

Gazprom's 6.21 percent notes due in 2016 yield 29 basis points more than the average among bonds with similar ratings and maturities issued by seven of its global rivals, Bloomberg data show.

Reuters, Bloomberg