| Deal At A Glance | |
|---|---|
| Deal Type: | Eurobond |
| Deal Structure: | 144a/RegS, Senior Unsecured |
| Issuer: | Steel Capital S.A. |
| Borrower: | PAO Severstal |
| Deal Size: | USD800mn |
| Issue Date: | 16 September 2019 |
| Tenor: | 5-year |
| Coupon: | 3.15%, semi-annual |
| Price: | 100.00% |
| Yield: | 3.15% |
| Issuer Rating: | Baa2 / BBB / BBB |
| Governing Law: | English Law |
| Location: | Russia |
| Listing: | Euronext Dublin |
| Joint MLAs: | Citi (B&D), J.P. Morgan, Societe Generale |
| Joint Bookrunners: | ING, Sberbank CIB, VTB Capital |
| Legal Adviser to Issuer: | Latham & Watkins |
| Legal for Arrangers: | Linklaters |
| Use of Proceeds: | General corporate purposes and upstream and downstream project financing |
Background
Steel producers have been by far and away the most prolific bond issuers in Russia in 2019, with Evraz setting the trend back in March with a USD700mn 5-year issuance that priced at 5.25%.
Since then, NLMK (USD500mn at 4.7%) and MMK (USD500mn at 4.375%, the lowest coupon for a Russian corporate at the time) have both hit the market, and ChelPipe, a steel pipe manufacturer, is set to make its Eurobond debut in coming days (with coupon reportedly set at 4.5%).
But those previous issues have been overshadowed by Severstal’s spectacular comeback, a USD800mn issue that priced at a mere 3.15% – well below even the sovereign’s recent 10 and 16-year dual-tranche that yielded of 3.95% and 4.3%, respectively.
Transaction Breakdown
Until last spring, Severstal’s most recent foray into the bond markets happened in February 2010, with a double-bill of RUB5bn and RUB10bn local issuances at 9.75%.
In April 2019 Severstal placed two bond issues on the domestic markets for the total amount of RUB25bn, equivalent to USD380mn, with 8.65% annual coupon.
On Thursday 5 September the company began a 2-day roadshow for a new benchmark-setting USD800mn issue, visiting London, Frankfurt and New York in the process. The following Monday (9 September), the issuer launched the bookbuilding at 3.5% for the new 5-year note, which was oversubscribed 2.5x at close.
The issuer received USD2.5bn bids at peak from 175 accounts. UK investors snapped up 30% of the notes, 26% went to accounts in Europe, 8% to Asia and the remaining 5% to the US.
Strong appetite for the corporate notes allowed Severstal to tighten by an impressive 350bp to price the bond at 3.15%, 50bp outside the sovereign curve. That represented the lowest coupon not just among Russia’s metals producers, but for any Russian non-state corporate on a USD bond with this maturity.
