Sovcombank, one of Russia’s largest private-sector lenders, has issued a new subordinated Tier 1 bond with a coupon rate of 7.75 percent. Demand for the bond has been particularly strong, with an order book of $1.9bn allowing the bank to tighten the spread by 75 basis points when compared to initial price talks. Demand eventually closed at an impressive $1.4bn.
Proceeds generated from the bond sales will be used to bolster Sovcombank’s capital reserves and build its reputation in the public market ahead of a planned initial public offering (IPO), which is expected later this year. The bond will also increase the bank’s capital buffers, helping it in its efforts to gain recognition as a domestic systemically important bank.
Demand for the bond has been particularly strong, with an order book of $1.9bn allowing the bank to tighten the spread by 75 basis points
The breakdown of bond orders emphasised Sovcombank’s broad appeal, with 22 percent of orders allocated to continental Europe, 12 percent coming from Asia and the Middle East, 12 percent from the UK and nine percent from the US. The remaining 45 percent came from Russia.
“We are pleased with and grateful for the interest in our bank from such a wide investor community,” Dmitry Gusev, Chairman of the Management Board at Sovcombank, said in a statement. “We attribute this to the bank’s reputation, business model and financial performance.”
The IPO roadshow – which took place between January 24 and January 29 across Moscow, Dubai, Zurich, Geneva, London and New York – brought the bank into contact with a huge number of potential investors, helping to drive interest ahead of its prospective IPO. High-profile financial institutions, including JPMorgan Chase, Sberbank, VTB Capital, Gazprombank, Alfa-Bank, Renaissance Capital and Emirates NBD, acted as bookrunners and joint lead managers for the bond issuance.
With six million clients and RUB 1trn ($15.8bn) in total assets, Sovcombank is already one of Russia’s largest banks, but this has not blunted its ambition. Late last year, the bank received rating upgrades from the Big Three credit rating agencies: Standard & Poor’s, Moody’s and Fitch Ratings. In addition, the bank recently expanded its customer offering through the acquisition of Liberty Insurance for an undisclosed amount. Collectively, these developments look promising ahead of the bank’s upcoming IPO.