Investors can buy Eurobonds easily from Russia's depository: chairman

30 May 2016
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Fears that investors could find it difficult to buy Eurobonds through Russia's National Settlement Depository are unfounded because it has developed ties with global banks to provide easy access, Eddie Astanin, its chairman, said on Monday.

The Russian finance ministry appointed the NSD as the clearing system for a $1.75 billion Eurobond it issued last week without involving the world's largest clearing banks, Euroclear and Clearstream. The innovation has deterred many investors used to working through the international settlement systems.

But in a written reply to Reuters questions, Astanin said the national depository's relationships with major global banks meant it was straightforward for foreign investors to invest.

"The NSD has nominee accounts with most of the largest global custodian banks," Astanin said. "So foreign investors may buy into a new Eurobond issue also via (the banks') Moscow units."

The NSD also has nominee accounts - a tool for holding a financial asset on a client's behalf - with both Euroclear and Clearstream, and vice versa, making it easy for investors to access other markets, Astanin said.

He said investors could settle up with the NSD in U.S. dollars, euros, Swiss francs, British pounds, yuan and other currencies.

In an interview with Russia's Tass news agency on Monday, Astanin also said the depository was gearing up to handle further sovereign Eurobond issues and was seeking to widen its base of investors, including ones from Asia.

Finance minister Anton Siluanov said last week that foreign investors had bought $1.2 billion of the $1.75 billion issue.

He also said Russia intended to bypass foreign investment banks when it issues bonds in future, relying instead on the country's own market infrastructure.

VTB Capital, the investment banking unit of state bank VTB, was the sole arranger of the deal, which could be topped up later this year. The Russian finance ministry's borrowing plan allows it to borrow up to $3 billion on foreign markets in 2016.

In the last two years Russia has rushed to develop this infrastructure, including the NSD and the domestic Analytical Credit Rating Agency (ACRA). It has also actively promoted the Moscow Exchange.

It acted out of fear that Western sanctions imposed on Russia in 2014 over its role in the Ukraine crisis might one day cut it off from global financial infrastructure.

"Placement of a new Eurobond is evidence of the systematic development of the Russian financial market's infrastructure," Ekaterina Trofimova, chief executive with ACRA, told Reuters.

"The fact that the order book was more than twice oversubscribed, and the share of foreign investors was 75 percent, is a reflection of changes in investors' sentiment toward Russian risk and the financial market's infrastructure."

ACRA was created as a domestic competitor to global ratings agencies to help Russia continue printing debt domestically if global ratings players stopped coverage. It expects to issue its first ratings later this year.

Technically, Western sanctions do not prevent foreigners from buying into the Eurobond as they do not target sovereign debt. But Washington has discouraged investors from buying the bond.

Russia has signaled it no longer wants to use Western investment banks for bond issues, but is keen to see its latest Eurobond traded via Euroclear and Clearstream and remains in negotiations with them, officials have said.

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