OREANDA-NEWS. Bank of Moscow has launched the debut issue of securitized Eurobonds for leasing company Business Alliance (BA) with an issue size of RUB8.3 bn. The rate was set at 8.875% for a 5 year tenor. The coupon and amortization is paid quarterly.

The reference asset of the securitization was two leasing contracts between OJSC "MOESK" (MOESK) and BA. Pledge of leased infrastructural assets (namely cables and electricity substations) of Moscow and the Moscow region were used as the additional collateral.

The Road Show was held from 12th to 20th of July 2007 in Moscow, Hong Kong, Singapore, Geneva and London. The book was more than twice oversubscribed at 9%, which let to the final yield reduction to 8.875% from the initial price guidance of 9%.

The bonds were placed among the diversified investor base: hedge funds (34%), asset management companies (9%), proprietary books of international investment banks (20%), Russian banks and investment companies (34%) and also private banks (3%).

The geographical breakdown: 34% - European investors, 42% - Russian investors, 3% - South-East Asia and 21% - US offshore.

"This deal is the unique one" - says the Head of IB at Bank of Moscow Igor Sukhanov. "It was the first time that a Russian Bank was the sole arranger of a securitization on the international market, leasing flows were securitized without traditional "true sale" of assets. This is the first ever infrastructural project and the first Eurobond for the Russian utility sector denominated in rubles out of Russia."

"We have structured the deal thoroughly taking into account specifics of Russian legal system and tax legislature instead of blind "copy-pasting" of globally accepted structures. The results exceeded our expectations - says Denis Gaevski, the first Deputy Head of IB. Despite cautiousness of certain market participants regarding the innovative structure, investors considered the BA / MOESK deal as one of the most appealing regardless current volatile market conditions. We believe that proposed mechanism will serve as a precedent for future deals, widen the spectrum of instruments for Russian borrowers, and open new arbitrage niche for international investors."

"The successful placement of Eurobonds is the part of Bank’s strategy to finance investment programs of energy companies. Currently, Bank Moscow is able to offer to energy companies in need for financing proved and reliable strategy to finance investment projects, taking into account all aspects of their business models and leading to maximum efficiency" - says Igor Dubonosov, the general director of commercial banking arm of Bank of Moscow.

The proceeds from the issue will be used by BA to refinance the existing loans extended by Bank of Moscow. The freed up credit limit will be used to finance new ambitious projects of BA and Bank of Moscow and to support the secondary market for this deal.

Investment company Troika Dialog was a senior co-manager of the issue, while Alfa Bank, Sviaz Bank, and Bank Petrocommerce acted as co-managers.