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. Last Updated: 07/27/2016

Gazprom Reviews Bonds Plan

Gazprom will go ahead with a 30-year benchmark dollar eurobond but has scrapped plans to issue 10-year paper amid volatile market conditions, banking sources said Wednesday.

The decision came as other market players suggested Gazprom might choose to postpone the entire dual-tranche bond after similar moves by other Russian firms, including Rosneft.

Last week, Rosneft pulled a multi-billion dollar issue just after finishing a roadshow, blaming volatility of global credit markets due to worries about U.S. subprime mortgages and their potential impact on the wider economy.

But banking sources said Gazprom had decided to place the 30-year paper, setting the yield guidance at 220 to 225 basis points over U.S. Treasuries. The pricing and the size of the issue should be set Thursday. The yield guidance is 40 basis points wider than the spread on Gazprom's 2034 bond.

But with spreads for Russian borrowers having widened only slightly against risk-free U.S. Treasuries of late, it may be better to borrow now rather than later, reckons Roland Nash, chief strategist at Renaissance Capital.

"The question is whether Russian spreads go from 100 basis points to 200, which is possible," he said. "If I were Gazprom, I would get as much debt as I can now."

The bond is part of Gazprom's long-term borrowing program, and the company this month doubled the maximum ceiling for borrowings under it to $30 billion following major acquisitions.

The outlook for the bond was also hurt by a dispute between Moscow and London, which wants to extradite a Russian suspect in the fatal poisoning last year of Alexander Litvinenko.