Updated April 3, 20

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   Gazprom placed Eurobonds to the sum $1,5 billion on April, 2. The profitability of issue has been initially declared at the level considerably exceeding the parameters of the securities circulating at the market. The investors were offered over 0,5% bonus. Then the hair-trigger reaction has followed, as investors started to sell bonds of other companies. Thus, Gazprom has started the process of debts revaluation of the Russian companies.

   Interfax agency reported that Gazprombank had declared about the profitability of the planned Eurobonds issue at the $1,5 billion volume placed in terms of two tranche as LPN.

The profitability of issue, repaid in five years, would make 7,5% per annum, in ten years – 8,2-8,5%. "These levels envisage a bonus to the current profitability of the gas monopoly Eurobonds at the 0,8-1% level", MDM-Bank

analysts calculated. They could not recall that the Russian borrowers of such high level had offered the significant bonus for their bonds' initial offering. "The bonus was no more than 0,4% earlier, even during the most unsuccessful market environment", suppose in MDM-Bank.

   The stated profitability level by the new issue of Gazprom Eurobonds aroused the hair-trigger reaction at the Eurobonds market. The quotations of Gazprom and Gazprombank analogical in terms of bonds repayment went only 0,5% down as compared to the average price the day before. But Lukoil securities' prices have fallen 1,3% down. The quotations of Transneft, TNK-BP and Severstal bonds reacted less sharp.

   The access to the global bond market is closed for the majority of borrowers now.

However, the inves tors are ready to provide funds such issuers as Gazprom and Rosneft.

"The market remained accessible for the companies of such level, but the terms of funds attraction became harder there", considers Trust Bank analyst Pavel Pikulev. According to him, the gas monopolist enters the debt market

too often, and investors are not ready to buy securities without a significant bonus in terms of instability at the markets. According to Cbonds agency data, from the moment the Russian market has felt the influence of the world crisis for the first time, Gazprom has placed four issues of Eurobonds at $3,3 billion. 20 issues of the gas monopoly Eurobonds costing around $21,5 billion are in the circulation.

   The planned placement is carried out within the framework of the debt borrowings program with the maximum volume $30 billion. An issue will consist of two series to the total sum $1,5 billion. Fitch Ratings rating agency has given the BBB- rating to the planned issue of Eurobonds. The rating of the whole LPN program was raised to the analogical BBB- level.

   Gazprom does not have specific aims for borrowing.

It needs money for both operating and investment-financial activity, as well as for refinancing the current debts", considers oil and gas analyst Capital Investment Company Vitaly Kryukov.

Gazprom should cancel three syndicated loans to the sum $2,15 billion by the year-end. "Thus, Gazprom debt load is not high", considers the head of MDM-Bank department for bonds market analysis Mikhail Galkin.

Fitch analysts also speak about the strengthening of the monopoly borrowing capacity.

   However, Gazprom has marked the stated levels of profitability down up to 7,25% and 8,1% respectively. They are 0,3-0,4% lower than the last ones and exceed the total level of the monopoly profitability by 0,6-0,7%. "The issue organizers have chosen the efficient strategy, having declared at the beginning the very attractive benchmark for profitability, and that provided them with the surplus of demand from the investors' part", Mikhail Galkin supposes.

The significant oversubscription allowed Gazprom to correct the benchmark for profitability down and, nevertheless, to attract the necessary volume, he adds.

   The profitability, with which the recent Gazprom placement has passed, still exceeds the current market level. "The market did not digest the new levels yet, which Gazprom decided to occupy", considers ING Wholesale banking analyst Andrey Andreyanov. According to him, in the future one should expect sales continuation of the corporate bonds belonging to other companies to buy more favorable securities of Gazprom.

As for the new issues which Rosneft and Evraz planned, they will have to place oneself with the considerable bonus looking at Gazprom, which bonds are considered the benchmark.