Russia‘۪s Norilsk Nickel Surprises with Success of $1 Billion Eurobond Offering

On October 6, Norilsk Nickel closed the book on a seven-year Eurobond offering of $1 billion at an initial yield of 6.25% (since dropped to 5.65%).  The bond was oversubscribed four fold, demonstrating the willingness of the European investment community to reengage with Russia and their acceptance of the current level of risk associated with certain Russian entities (despite the recent Syria intervention).  Barclays, Citigroup, ING Groep, Societe General and UniCredit managed the sale.

This is the first benchmark-sized Eurobond sale by a Russian company since Gazprom raised $700 million in a one-year note last November.  In 2015 the only other Russian entity to raise funds on international markets was Ak Bars Bank, attracting $350 million in early August.  Neither Gazprom nor Norlisk Nickel has been sanctioned due to Russia‘s military action in Eastern Ukraine. 

Gazprom is reportedly looking to follow Norilsk and currently has plans to raise 1 billion euros in an additional bond offering in the near future.  Russian business analysts believe that further sales will likely come from companies in the mining, fertilizer and telecom sectors, which will be buttressed by Norilsk Nickel‘s success.

One of many outstanding questions is whether European and other global investment appetites will remain in place, given the opening of a second military front by Moscow in the Middle East.