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Norvik Research 24.04.2017

24/04/2017 15:57

Global developments

Risky assets were supported by the outcome of the 1st round of French presidential elections. Pro-growth independent centrist Macron who took around 23.7% of vote and Front National leader Le Pen (about 21.5%) will head into a run off second round on 7 May. This scenario was the most favourable for the markets as Macron is expected to win the second round with more than 60% of votes. The dollar index is down 0.9%, US 10Y Treasury yields are up 5 bps at 2.30%. S&P futures are 1.1% higher while Eurostoxx 600 is 2.0% up.

Oil prices are up despite rising drilling activity. Baker Hughes active rotary rigs number increased by 5 to 688 in the previous week. Brent prices are up 0.8% to $52.4/bbl.

Russia and CIS area developments and market colour

The rouble is strengthening against the dollar to the maximum level since July 2015. USDRUB is 1.3% lower today at 55.9 before MET payments amid the weaker dollar after the French elections. OFZs yields are 5-10 bps tighter today.

Corporate news

KazMunayGas National Company (KMG) sold $2.75 billion of Eurobonds across three tranches with maturities ranging from 5Y to 30Y.

Eurobonds were issued in three series: $500 million 5Y with coupon at 3.875%, $1.0 billion 10Y with coupon at 4.75%, and $1.25 billion 30Y with coupon at 5.75%.

According to the company’s data, the debt offering had a solid demand from investors with the book reaching $6.5 billion, which allowed KMG to raise the targeted amount with attractive pricing. Strong debt offering from KMG set a new benchmark for the company, as well as for other corporate issuers from Kazakhstan.

The deal was the largest corporate offering of Eurobonds among CIS countries since 2014. The debt offering was given BBB-/BB/Baa3 (Fitch, S&P, Moody’s) rating.

It is also worth mentioning that KMG has a solid balance sheet with moderate debt burden. Debt to Capital stands at 32.86%. Current ratio is also strong standing at 2.32. For issuers of KMG’s quality, KMG is a little overleveraged with Net Debt/EBITDA at 4.95x.

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