NILSY MMC Norilsk Nickel PJSC (CE)

By Christopher Whittall 

Metals mining company Norilsk Nickel on Tuesday became the first Russian company in over nine months to issue a bond in U.S. dollars, according to a deal notice seen by The Wall Street Journal.

Norilsk Nickel will pay a semiannual interest rate of 6.625% on a $1 billion bond that comes due in October 2022, according to the notice.

It comes as some investors take encouragement from a perceived easing of tensions in Ukraine, concluding that the relative calming lessens the likelihood of further international sanctions on Russian companies. For Russian companies, the easing of tensions has helped lower financing costs this year, prompting them to start sounding out international bond investors once again.

Russian energy giant OAO Gazprom began a series of investor meetings on Monday, spread over three days across Europe, according to a person familiar with the meetings. The company is examining the possibility of issuing a bond denominated in euros, the person said.

Gazprom didn't return requests for comment.

"Investors are becoming more comfortable with Russian credit. A lot of these companies are pretty well-run companies, with low debt levels," said Max Wolman, a senior investment manager at Aberdeen Asset Management, which oversees GBP307 billion in assets.

Even so, Mr. Wolman said new Russian corporate bond issuance in international markets is likely to be limited until sanctions against Russian companies are lifted, given that U.S. and European investors are prohibited from buying new debt deals from sanctioned companies.

Before Norilsk Nickel, no Russian company had borrowed money in U.S. dollars since January, according to data provider Dealogic. Russian companies also haven't issued new debt in euro, sterling or yen bond markets over this period, Dealogic said.

The average yield on Russian corporate and quasi-sovereign corporate debt denominated in U.S. dollars rose to over 13% last December, according to Barclays. That followed a collapse in the price of oil, international sanctions on some Russian companies and individuals and an escalation of the conflict in Ukraine.

The yield, which falls as prices rise, has since dropped to 6.45%, according to Barclays.

Norilsk Nickel is the world's largest producer of nickel and palladium and a large producer of platinum and copper, according to the company's website. Norilsk Nickel didn't return requests for comment.

"It's a better environment for Russian companies to access international bond markets," said Mitch Reznick, co-head of credit at Hermes Investment Management, who said he placed an order for the new Norilsk bonds.

"If this deal goes well, it will potentially pave the way for other high-quality Russian companies to return to international capital markets," said Mr. Reznick, whose firm oversees around GBP30 billion in assets.

Write to Christopher Whittall at christopher.whittall@wsj.com

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(END) Dow Jones Newswires

October 06, 2015 13:41 ET (17:41 GMT)

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