The second attempt of Alrosa. The company is going to issue eurobonds worth USD800mln

Alrosa waited out the summer lull on international markets and is now getting ready to place 10-year eurobonds worth USD800mln. Analysts say that the diamond monopoly needs to make the placement before the year-end, to make sure the loan costs no more than 9% p.a.

Last year in spring Alrosa launched its debut 5-year eurobond issue worth USD300mln. At that time the analysts called the placement a success, as the bonds yielded 8,1258% p.a. Mikhail Galkin, the analyst at Trust bank, says that Alrosa’s bonds are now successfully traded on the secondary market at 7.8% p.a.

On May 6, 2004 Alrosa’s BoD approved the decision to issue another eurobond tranche worth USD800mln before the year-end. The 10-year bonds will be issued by the diamond monopoly’s subsidiary ALROSA Finance S. A., with J. P. Morgan as the underwriter.

However the company did not launch the bonds. A source in the company says that the decision was based on “bad market conditions”.

The BoD will meet this Friday to discuss the placement. A source close to the BoD informs that the second approval of BoD is required, since the deal structure has been changed. The source says, it is a question of some “minor technical details”. According to him, the basic issue terms remained intact. It is still a USD800mln issue with a 10-year tenor. The issue timing will be determined after the BoD’s approval. “But the sooner the better – the markets a favorable now”, - he says, adding that the company hopes to make the placement before the year-end.

The company will use the proceeds for debt refinancing. According to the source in Alrosa, the company’s outstanding short-term debt currently amounts to around USD300mln, while the overall debt is estimates at USD1.2bln. The company intends to decrease its debt to USD1.1bln by the year-end. Alrosa’s share in the global diamond production is 25%; last year it produced diamonds worth USD1.5bln. Its IFRS revenue amounted to RUR60bln, net revenue – RUR6.35bln. The Russian government owns 37% of the company’s tock, the government of Yakutia - 32%, employees – 23%, and uluses (districts) of Yakutia – 8%.

Based on Vedomosti data