(Bloomberg) – The Russian national carrier is preparing its first bond issue since 2013 amid the difficult recovery of international flights following the Covid-19 pandemic.
PJSC “Aeroflot” plans to collect applications for the purchase of five-year bonds for at least 15 billion rubles on June 10, a source familiar with the placement conditions said at the end of last week. The benchmark for coupon series P01-BO-01 is up to 220 basis points of premium to the zero-coupon yield curve for a period of five years, the value of which was 6.98% as of June 8.
The company posted a January-March loss for the sixth consecutive quarter and advised shareholders to refrain from dividends after pandemic restrictions hit the airline industry worldwide. The credit risk of a state-owned airline is perceived to be much lower than its rating at BB-, says Denis Kuchkin, General Director of LLC IK Septem Capital, predicting the actual volume of placement at 20-25 billion rubles with a fair coupon level of 8.25-8. 5% per annum.
“Investors have a great opportunity to take advantage of the situation and invest in a blue chip at the price of the second tier,” he wrote by e-mail. “The company’s securities are primarily of interest to institutional investors, but individuals should not miss such a ‘tasty’ offer either.”
Sistema’s recently placed bonds with comparable ratings and durations offer around 8.00%, while the fair yield on Aeroflot is in the range of 8.00-8.20%, Yuri Golban, an analyst at BCS Global Markets, wrote in a review.
Aeroflot’s press service reported that the volume of attraction depends on the development of the situation with the restoration of traffic, including international ones. In April 2013, the company placed three-year bonds of the BO-03 series for RUB 5 billion.
“Aeroflot is not a frequent visitor to the market. Investors have been looking forward to its bonds for a long time,” Kuchkin wrote. “The coupon guidance of 9% + looks too tempting.”
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