March 26, 2019, 14:33 / Business

Severstal will place bonds worth 15 billion rubles

Debt will increase slightly and will not affect the size of dividends Polina Trifonova

Evgeny Razumny / Vedomosti

On April 4, Alexei Mordashov's Severstal will open an order book for the placement of ten-year bonds, an investment banker told Vedomosti, citing the placement organizers. A company representative confirmed the information about the placement. In total, Severstal plans to place securities worth 15 billion rubles.

Severstal is always looking for opportunities to raise funds on favorable terms, including for the implementation of investment projects, a company representative said. The company's low debt load allows it to borrow on favorable terms, he added.

A Severstal representative emphasized that the bond issue will not lead to a significant increase in the company's debt burden. “Net debt will be equal to EBITDA, which will allow the company to pay out 100% or more of free cash flow to shareholders as dividends,” he explained. Severstal's dividend policy assumes that it will pay out 100% of free cash flow to shareholders if net debt is less than or equal to EBITDA, and more than 100% of free cash flow if the net debt/EBITDA ratio is below 0.5. At the end of 2018, this figure was 0.4.

15 billion rubles. - a small issue for the company, notes Aton analyst Andrey Lobazov. The money will most likely be used to refinance current debt or for capital expenditures of Severstal. Severstal's net debt at the end of 2018 amounted to $1.2 billion.

Over the next five years, Severstal plans to increase EBITDA by 10–15% annually and implement a large production modernization program, recalls Maxim Khudalov, director of the ACRA corporate ratings group. “Bond rates are low right now, so this is a good way for a company to raise debt for its investment program,” he notes.