Rosselkhozbank will raise 10 billion rubles. with pension funds and management companies by placing their structured bonds. The transaction is carried out in the interests of Peresvet Bank, the main shareholder of which is the Russian Orthodox Church.

Branch of Peresvet Bank (Photo: Oleg Yakovlev / RBC)

Key investors

Rosselkhozbank (RSHB) will issue ten-year structured bonds worth 10 billion rubles. As stated in the bank’s presentation to investors (available to RBC), RSHB is targeting a yield of 11.75–12.75% per annum, while the underlying asset for the securities will be bonds of another bank, Peresvet. The issue meets the criteria for investing pension savings of NPFs, as emphasized in the presentation for investors. The key investors that RSHB is counting on are non-state pension funds, management companies, as well as banks, the presentation says.

The placement scheme is as follows: RSHB issues its own bonds, part of the funds from which will be used to repurchase bonds, which in turn will be issued by Peresvet Bank. In addition, part of the funds, as noted in the presentation, will be used to purchase OFZs, the yield of which should ensure holders of RSHB structured bonds the safety of their investments.

Last week in St. Petersburg, the management of RSHB and Peresvet Bank held a meeting with investors, including several representatives of private management companies and non-state pension funds. Many management companies that manage pension money received an invitation. “This is an interesting proposal, given that similar securities of the RSHB itself are traded with a yield of 10–11.5% per annum, but it is necessary to assess all the risks of this instrument,” said the manager of the investment company, who received a letter from the RSHB. According to Anton Kiryukhin, director of the debt capital markets department at Rosbank, formally the issue of structured bonds will have a RSHB rating, which is significantly higher than that of Peresvet Bank. According to the scale of the international rating agency Fitch, the credit rating of RSHB corresponds to the level BB+, the rating of the Peresvet bank is at the level B+. “However, investors will have to analyze these bonds as a mix of two instruments and assess the risks based on the net present value of coupon payments and face value, understanding that in fact part of the risks, approximately 50-60%, will come from the risk of Peresvet Bank, and the rest goes to Rosselkhozbank,” says Kiryukhin.

Igor Kozak, head of fixed income asset management at TKB Investment Partners, believes that Peresvet Bank has a need to attract long-term money and at the same time reduce the cost of funding. The bank's bonds are now trading with a yield of about 14% per annum. In total, the bank has eight bond issues in circulation worth RUB 24.6 billion. “In tandem with RSHB, the bank will pay a lower premium than if it placed its bonds on the market. Most likely, the issue will be sold in the “one-handed placement” format, the financier believes. At the same time, Kozak does not rule out that non-state pension funds may also be buyers of structured bonds: that is why an issuer with a higher rating is needed.

ROC Bank projects

According to Kiryukhin’s estimates, taking into account the profitability offered to investors and the guarantees of safety of the nominal value of the invested funds, participation in the transaction will allow Peresvet Bank to attract from 5 billion to 6 billion rubles from the Russian Agricultural Bank. “It is obvious that it is difficult for a bank of this level to obtain financing for such a long period. Typically, banks with such ratings raise money on the debt market for no more than two to three years,” he noted. RusRating agency analyst Larisa Makarenko believes that Peresvet Bank might need funds for the implementation of long-term projects. “From a liquidity and capital perspective, we don’t see it having any problems,” she said.

As RBC previously wrote , Peresvet Bank is a co-owner of AgroKultura Group LLC, which invests in greenhouse complexes for growing cucumbers and tomatoes. Peresvet also invests money in innovative projects through the Sberinvest company, in which the bank owns 18.8%. Funding for innovation is shared: 50% of the money is provided by Sberinvest investors (including Peresvet), 50% by state corporations and funds. Funds for projects co-financed by Sberinvest were found in the Russian Venture Company, the Skolkovo Foundation and the state corporation Rusnano.

Kiryukhin doubts that investments in OFZs, the yield of which is now below 9% per annum, will ensure a 100% return on investors’ funds. “In addition, RSHB as an issuer also bears interest rate risk. Since RSHB plans to pay interest not in the form of regular coupons, but at the end of the term, regular payments from assets in which the raised funds will be invested will need to be reinvested at rates that will be relevant at the time of receipt of such payments. Taking into account the expectations of lower rates in the market, doing this in a way that ensures the required bond yield will be problematic,” Kiryukhin believes.

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The deal is planned to be completed at the end of June 2016, a source close to the placement organizers knows. RSHB and Peresvet Bank did not respond to RBC’s request.

Rosselkhozbank is one of the top 10 largest banks by assets, 100% of the shares are owned by the Federal Property Management Agency. The bank's assets as of May 1, 2016 amounted to 2.66 trillion rubles. At the end of 2015, the loss of RSHB according to IFRS amounted to 94.2 billion rubles, doubling compared to 2014. According to RAS, the bank showed a loss of 69.2 billion rubles in 2016; in the first quarter of 2016, its financial result was positive: the bank earned 4.3 billion rubles. net profit.

Bank Peresvet is one of the 50 largest banks with assets of 188.4 billion rubles. (data as of May 1, 2016). Its main owner, according to data as of March 31, is the Russian Orthodox Church, which owns 49.7% of the shares. 24.35% of the bank's shares are owned by Expocentre CJSC, whose main shareholder is the Chamber of Commerce and Industry. At the end of 2015, the bank showed a profit of 3.8 billion (according to IFRS).

As RBC previously wrote, Peresvet is the main bank for the Russian Orthodox Church. As of May 1, 2015, its accounts contained funds of enterprises and organizations (80.75 billion rubles) and individuals (22.2 billion rubles)

The Bank of the Russian Orthodox Church decided to attract pension money