Sunday, 29 july 2007

Securitized Eurobonds issuance

BALC successfully issued RUB 8,3 billion securitized eurobonds.

BUSINESS ALLIANCE, leading leasing company in the energy sector, has successfully issued RUB 8.3 billion securitized Eurobonds at a coupon of 8.875% with a 5-year tenancy.

For the implementation of a number of lease agreements signed between BUSINESS ALLIANCE and “Moscow Unified Electricity Distribution Network” (MOESK) in 2006 and totaling about RUB 12 billion, BALC obtained a loan from the Bank of Moscow and simultaneously organized the issuance of securitized Eurobonds (ABS) in order to refinance the obtained credit.

BUSINESS ALLIANCE originated the placement and Bank of Moscow organized it.

The underlying asset of the Eurobonds is the lease payments from MOESK to BALC, which may be redirected to the creditors in order to secure the leasing company’s liabilities, which in turn are based on a combination of the Russian and the English law.

The road show was held in Moscow, Hong Kong, Singapore, Geneva and London between 12 and 20 July 2007. Since the transaction was the first of its kind, investor education was held from April 2007. As a result of significant demand on the part of investors, the coupon rate was reduced from 9% to 8.875% with a credit note circulation period of 5 years.

Participants in the transaction included major investment funds (34%) and asset managers (9%), international investment banks (20%), Russian banks and investment companies (34%), as well as private banking institutions (3%). 34% of the issuance went to European investors, 42% to Russian investors, 3% to investors from Southeast Asia and 21% to offshore North American investors.

Highlights of the transaction:

It was the first time that Eurobonds were used, not for the purposes of a specific placement, but to finance a Russian leasing company that was carrying out a transaction and really working on the market. As a result, the position of the leasing company is better secured in terms of VAT.

• The first Eurobond for an infrastructure power energy project.
• The first Eurobond in Russian rubles organized by a Russian bank for a leasing company.
• There was no sale of lease agreement from one leasing company to another one specifically created for such purpose (true-sale).

We are sure that the demand for such instruments will increase not only on the energy market, but also for the implementation of projects that require significant investments in other industries of the Russian economy.