Posted by: russiaoilandgas | July 18, 2007

Rosneft Backs Away From $2 bln Eurobond Issue

RosneftRussian state-owned oil giant, Rosneft, has delayed a $2 billion Eurobond issue designed to refinance the debts incurred during the purchase of Yukos assets.  According to Russian daily newspaper, Kommersant, the head of a group of financial advisors to the Rosneft president has cited a combination of the negative mood in the US and European debt markets and Rosneft’s relatively strong financial position as a reason for the delay.

Although there are few problems with the Russian investor climate or debt market, the weak state of both the European and US debt markets is compelling fund managers to refocus their attention on bonds with very high credit ratings and re-assess the worth of bonds issued from emerging markets, according to Kommersant.  At the same time, Rosneft is in no rush to re-finance the $22 billion dollars it borrowed from lender banks in order to fund their purchase the debts of fallen oil and gas giant Yukos.  It has already paid for $11 billion of the debt through a combination of credits and bank loans, and has until September 2008 to refinance the rest.

Rosneft is the latest in a number of Russia’s corporate giants to delay the issue of the bonds.  Both the Bank of Moscow and VTB-24 bank have done likewise recently, and while the international markets remain volatile, the trend is likely to continue. However, while Rosneft has between $25-26 billion of long term debt, analysts believe the company will have little problem paying off the debt.  Rosneft has recently secured a credit line of 8.4 billion roubles with VTB and, according to varius news sources, will look to recommence their Eurobond issue at the end of this year.

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