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