LONDON: Amid the flurry of issuance in the CEEMEA bond market this year, one theme has dominated: corporate supply, especially from Russia and the CIS.
So far, there have been 32 corporate deals excluding separate tranches from Russia and CIS, totalling a staggering USD28.32bn, according to IFR data. This compares with just five deals raising USD2.58bn over the same period in 2012.
The CEEMEA corporate volume swells to USD40.09bn from 51 offerings, more than 40 percent of the region's overall issuance volume. Debutantes, in particular, have been to the fore. In contrast, corporate issuance reached just USD6.42bn in the same period last year from 10 transactions.
There are, moreover, no signs of the flow slowing: Frigoglass, Ukrzaliznytsia, Nitrogenmuvek Zrt, Kazagro, Russian Helicopters, Millicom International Cellular and MMK all have outstanding public mandates while several others, Rosneft and BEH included, are rumoured to be considering deals.
Perfect issuance conditions are encouraging CEEMEA corporates, from a wide range of sectors, to catch up with their counterparts in Asia and Latin America, who are regular borrowers in the bond market.
With investors desperately seeking yield many corporate deals, especially the higher-rated ones, are being bought not just by the usual emerging market fund crowd but also by accounts relatively new to the asset class, such as US state pension funds, Canadian funds and insurance companies in France, bankers said. Local and regional investors are also becoming more prominent, especially for Russian deals.
"There is a huge demand for EM debt. This is because of increased risk appetite. One very clear indication of this is the equity indices the S&P, Dow Jones and Dax are all at record highs," said Alexander Kudrin, head of fixed income research at Sberbank Investment Research.
So much so that steel companies, which have generally delivered poor earnings results due to falling prices, have not had a problem in raising money, he said.
For example, Evraz (Ba3/B+/BB-) went to market a day after announcing a USD106m loss for 2012, eventually pricing a USD1bn 6.5 percent 2020 note. A large chunk of proceeds went into paying off a structured loan.
This glut of issuance is having an effect on how the corporate sector in Russia and the CEE region manages its money.
"Since 2009 there have been some quite significant changes in how companies fund themselves, particularly with regard to capital markets issuance.
The move has been dramatic in Western Europe but even in Russia we have seen a reduction in the loan portfolios," said Peter Archbold, metals and mining analyst for ratings firm Fitch.
A trader said the markets continue to be wide open. "The markets are on fire," he said, though a banker urged a note of caution, pointing out that the last time the market saw such a surge in corporate and high-yield issuance was in 2007.
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