MARKET SIGNALS
INVESTMENT IDEAS
Today we will look at two corporate debt securities as investment ideas for this week: Belarus and Sovkombank
IDEA #1: BELARUS
Last week, S&P affirmed Belarus’ long-term and short-term sovereign credit ratings for obligations in foreign and national currency at level B with a “stable” outlook. The agency noted an improvement in the macroeconomic policy of the republic, which allowed to stabilize its level of public debt and inflation rates. S&P experts believe that the Belarusian government will retain access to international capital markets and the possibility of obtaining support from Russia to refinance payments on public debt.
Belarus has three dollar issues of Eurobonds. With the highest premium in yield to the Russian curve, the issue is currently traded with maturity in 2027, which offers a yield of 5.5% with a duration of 6 years. Paper is serviced by NSD.
IDEA #2: SOVKOMBANK
Against the backdrop of lower yields, relatively high-yield securities are of particular interest, among which the recently posted Sovcombank debut Eurobonds maturing in 2030. According to the results of the first half of 2019, the bank took the 12th place in terms of assets in the Interfax-100 ranking. All three Big Three agencies hold a “stable” outlook on the change in its ratings. Last month, S&P and Fitch increased their issuer ratings, noting that in the medium term Sovcombank could be included in the list of systemically important banks.
A $ 300 million subordinated Eurobonds was placed on September 30 this year with a coupon of 8.0% per annum. On paper, a call option is provided in April 2025 at face value. The minimum issue lot is 200 thousand dollars.
It should be noted that the issue of Sovcombank looks interesting not only in the segment of Russian bank securities of the second or third echelons (see the market map on page 17 of the review), but also against the background of international subordinates with a similar credit rating.
Alexey Shternshis
Joint Managing Director
Capital Pi
