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. Last Updated: 07/27/2016

Gazprom Eurobonds Net Total of $2.4Bln

Gazprom raised $1.3 billion and 850 million euros ($1.14 billion) in heavily oversubscribed bonds Wednesday as investor appetite for emerging market risk brought a healthy cut in pricing rates.

The country’s gas export monopoly — and its most indebted firm —priced the five-year dollar bond at 8.125 percent, down from the initial 8.5 percent. The 5 1/2-year euro tranche was also priced at 8.125, down from the initial 8.75 percent.

Analysts said the Gazprom deal was benefiting from rising appetite for emerging markets risk from Western investors and from a lack of Russian borrowers tapping the market.

“The market is reviving … there is a huge inflow of fresh money to investment funds. And Gazprom is quite well-positioned as far as there is demand for the Russian assets,” said Alexander Kudrin, an analyst at Troika Dialog.

A banking source close to the placement said the order book for the dollar tranche alone was over $6 billion. “It is a super deal,” he said.

Gazprom, whose debt is estimated at over $40 billion excluding Gazprombank, has more than 20 outstanding bond issues.

The last time it placed a eurobond was in April, when the company sold $2.25 billion worth of 10-year paper, pricing the deal at 9.25 percent — meaning that the deal on Wednesday was priced more than a percentage point lower than three months ago.

By comparison, Citigroup on Monday sold $2.5 billion of 30-year nonguaranteed senior bonds at a coupon of 8.125 percent. Energy firm BG priced this month a 750 million euro 2013 bond at a coupon of 3.375 percent.

Unlike many firms, Gazprom has not sought direct state help this year, although Sberbank has been Gazprom’s most active lender since January.

Gazprom borrowed $11 billion in the first half of 2009, more than $4.5 billion of which came from Sberbank, while redeeming only $5.3 billion, it said in a bond prospectus to investors this week.

Many analysts have warned that the company will face financial difficulties at the end of the year, when prices of gas hit their lows as they catch up with oil prices with a lag of six to nine months.

Gazprom says its financial situation will remain stable, although its core earnings have likely halved in the first quarter, and it only hopes to generate positive cash flow in 2009 because of low prices and depressed exports.

Reuters consensus estimates put Gazprom’s net profit at about $20 billion this year, down 9.5 percent from 2008.