The Fund's investment activities are intended for high net worth individuals who are considered to be sophisticated investors that are looking for a fund that aims to protect the capital invested whilst at the same time generating above average returns.
Attention! This investment falls outside AFM supervision. No license and no prospectus required for this activity.
This will be achieved through investments in public and corporate stocks and bonds, financial instruments, including futures and options, and certain types of real estate, although this type of investment will not represent anything other than a small percentage of the total investment fund. The nature of this alternative investment fund is that it is able to react swiftly to ever changing possibilities and risks in the markets and as such it
is assumed that other asset classes will be traded in the future if this is seen as being beneficial to the investors by the Fund managers. In addition, new sister Funds may be established in the future that will have a more specific investment focus if this is required by investors.
FULL DETAILS OF THE INVESTMENT POLICY CAN BE VIEWED DIRECTLY
Whilst the Fund aims to generate above average returns for Investors, the main priority of the Fund is primarily the safety of the funds that have been entrusted to us by our clients. It is for this reason that one of the main targets for investment is in Europe's largest firms. In addition, the priority given to debt instruments and, where appropriate, real estate is also considered to be an important element of the investment portfolio. At the same time we do not forget that in addition to minimizing the risk for our investors, we need to maximise the value of the investments made by our clients, and repay the trust demonstrated in us to manage these conflicting forces on their behalf.
For the purpose of maximising returns made by the Fund our managers and analysts constantly monitor the market situation in all the markets in which the Fund operates and any possible new markets. With the constant flow of informed market intelligence, decisions are made and assets traded between all the markets in order to ensure the best investment profile to maximise return and minimise risk. This technique ensures the maximum possible growth of the value of the assets but also makes it possible to hedge the possible risks of changes in market prices.
Our team consists of professionals with extensive experience in the Russian and global stock and commodity markets. Most have worked in large investment houses and our analysts are included in the TOP10 according to Bloomberg. With this extensive experience the team at Capital Pi aim to surpass your expectations and achieve good but safe returns on your investments through us.
The strategy is based on operation in debt markets of the G20 countries. Funds are invested in highly liquid, supranational, sovereign, municipal and corporate debt securities with an investment grade credit rating (at least BBB-) according to the key credit rating agencies (Moody’s, Standard &Poor’s, Fitch).
The investment instrument in this strategy is eurobonds from a limited range of issuers. In the selection of issuers to be included in the portfolio, the key factors are its balance across economic sectors and across the credit quality of issuers. The share of one investment instrument can be up to 25% of the overall portfolio. The key factor enhancing the expected return of this investment product is the opportunity to raise funds against securities in the portfolio at market rates. Thus, the expected return at portfolio maturity can be higher if borrowed funds are used.
This strategy is based on expectations of the Russian government bond curve. Normally, the yield curve is a monotone increasing upward-convex curve. It means that, first of all, the yield grows with time (positive slope) and, second, the rate of yield change decreases in time (tends to zero).
Today we will look at one debt security as investment ideas for this week: Petropavlovsk PLC…
Today we will look at one debt security as investment ideas for this week: Howmet Aerospace…
Today we will look at few debt security as investment ideas for this week…
Today we will look at one debt security as investment ideas for this week: ABH Financial Ltd…
Today we will look at one debt security as investment ideas for this week: Volkswagen AG…
Today we will look at one debt security as investment ideas for this week: VTB…
Today we will look at one debt security as investment ideas for this week: Freeport-McMoRan Inc.…
Today we will look at one debt security as investment ideas for this week: GTLK…
Today we will look at one debt security as investment ideas for this week: Kinross Gold Corporation
The price of gold breaks historical records, which is not surprising, given that gold not only provides protection during crises, but is also an asset that benefits directly from rising dollar money supply - which is still observed now, during the period of intensive pumping of liquidity by markets. In this regard, it is logical to pay attention to the debts of gold mining companies, which, apparently, should continue to rise in price. For example, the Eurobond of Kinross Gold Corporation, one of the ten largest gold mining companies in the world, maturing in 2041. Note that the issuer has two active assets in Russia: Kupol and Dvoynoe (both in the Chukotka Autonomous Region).
It is not surprising that the market is very positive regarding the financial results of the company in 2020-2021. (see table below). We note the stable positive dynamics at the level of operating cash flow (FCF). It is expected that fuel prices and exchange rates favorable for gold miners will fully compensate for the additional costs of emergency measures taken during the crisis.
The debt repayment schedule is not worrying: the weighted average maturity is about 6 years, until 2024 the company has to make only one major payment - to pay off the Eurobonds in the amount of $ 500 million.
Net Debt / EBITDA metric is 1.0, as of March 31 .2020, the volume of cache on Kinross Gold's balance sheet amounted to $ 1.1 billion, in addition, the company opened credit lines worth $ 0.7 billion. High credit quality is primarily based on growing revenue indicators.
All Big Three agencies hold an investment rating for the issuer. Note that Moody’s upgraded its Kinross Gold Corporation Eurobonds rating with maturity in 2041 to “investment” (Baa3) in the midst of March sales in the markets.
The probability of default for the company over the next 5 years, according to the Bloomberg model, is about 2.5%, which corresponds to the performance of the most highly reliable issuers. Due to the high duration (12 years), the probability of a company’s Eurobonds defaulting with maturity in 2041 over the remaining maturity period is, according to the Bloomberg default risk model, 14%.
It should be noted that in contrast to the LBUSTRUU index (which tracks the price dynamics of dollar-denominated Eurobonds of the "investment" category), which has already reached its "dock" levels (see the chart below), the price of KCN 2041 is still 8 lower than its highs in early March 2020
Joint Managing Director
Today we will look at one debt security as investment ideas for this week: Petropavlovsk PLC
On June 23, 2020, S&P upgraded the rating of the gold mining company Petropavlovsk PLC from B- to B with a "stable" outlook. "The upgrade is a recognition of the progress made by the company in several key areas, including ensuring strong operating performance, following its strategy, and reducing its debt burden," S&P notes. "We expect that Petropavlovsk will continue to show stable results in 2020-2021 due to the stabilization of operations and favorable gold prices," the press release said.
According to the agency’s forecast, Petropavlovsk will maintain the net debt to EBITDA ratio at the target level (below 2x), as well as maintain an acceptable level of liquidity, including through active refinancing of bonds with maturity in 2022.
The company's Eurobond yield maturing in 2022 pretty steadily declined throughout 2019 (see the chart below), reaching 5.0% at the end of February this year. It is curious that now it is about the same value (5.2%), however, the credit spread of the issue expanded from February 24, 2020 from 375 to 501 bp. item, which looks illogical given the gold that has risen in price since then. In this regard, we expect a decrease in the yield of the Petropavlovsk Eurobonds with maturity in November 2022 to levels below 5%.
Joint Managing Director
Today we will look at one debt security as investment ideas for this week: Howmet Aerospace
Against the background of, apparently, inevitably tending to the negative area of returns of high-rated securities, interest is growing in issues that can offer a fairly high level of yield with acceptable risk. One of these papers is the release of Howmet Aerospace, an American manufacturer of jet engine components, aerospace and industrial fasteners, and parts for the aircraft and defense industries. Now, with respect to the issuance of this issuer with maturity in 2037, it is possible to fix a yield of 5.6%. The Eurobond, although it is trading above par, has not yet fully played back the consequences of the March collapse. Note that this issue is part of our portfolio of Global Ranking.
April 1, 2020 American aluminum producer Arconic Inc. completed the division of its business into two separate companies. The division for the production of rolling products, aluminum profiles and building systems is called Arconic Corp. The remaining operations, including the production of jet engine components, parts for the aircraft and defense industries, remained assigned to the existing company, which was renamed Howmet Aerospace. Capitalization of Howmet Aerospace is approximately 85% of an undivided company (Arconic Inc.). Accordingly, most of the obligations of Arconic Inc. (including the Eurobond maturing in 2037) moved to Howmet Aerospace.
The reorganization of the company does not allow a direct comparison of current data with the results of previous years, however, it can be noted that the market is rather optimistic about the dynamics of Howmet Aerospace in 2021 (see table below). A program to reduce costs by $ 100 million, a refusal to pay dividends and a twofold reduction in CAPEX will contribute to maintaining the company's free cash flow in a positive area.
Currently, the Net Debt / EBITDA metric is 2.8, the amount of cash on the balance sheet is sufficient to fully repay the debt until 2024. In addition, the company still has a non-selected revolving credit line of $ 1.5 billion ., which may cover a potential shortage of liquidity.
Nevertheless, due to the uncertainty generated by the current crisis, credit agencies diverge significantly in their assessments of the issuer's credit quality. If S&P and Fitch agencies hold "investment" ratings for the issuer and its obligations, then Moody’s agency is three steps lower (Ba3). Moreover, the Moody’s agency even has a “negative” outlook on its rating, expecting the issuer to have significant problems amid ongoing turbulence in the aircraft industry. Note that the Big Three was revising its forecasts for an already split company.
Although the probability of default of Howmet Aerospace over the next year, according to the Bloomberg model, is rather moderate (2.1%), the probability of default over the next 5 years looks too big for a company with an "investment" rating of 7.6%. Note that due to a rather high duration (10 years), the probability of default of the Eurobonds with maturity in 2037 during the remaining period until maturity is 21%.
As can be seen in the graph below, from the beginning of March 2020 - the time of the onset of the storm in global markets - the dynamics of the price of Eurobonds with maturity in 2037 generally corresponded to the American second-tier corporate bonds index (LF98TRUU). Interestingly, a year ago - in the middle of June 2019 - the Eurobond yield was consistent with the current one: the drop in benchmark yield (corresponding to UST duration) was offset by the expansion of the credit spread. Thus, the upside potential of the Howmet Aerospace Eurobonds seems to be very substantial. However, a necessary condition for its implementation is the normalization of the situation in the economy, and, in particular, in the American aircraft industry.
The issue is serviced by NSD and is available only to qualified investors.
Joint Managing Director
Today we will look at few debt security as investment ideas for this week
Against the backdrop of the placement of the ruble Eurobonds by Veon, we decided to pay attention to this segment of the market, which, I must say, traditionally remains somewhat in the shadow of the interests of investors. Meanwhile, a number of large Russian companies attract ruble funding in the foreign market, which allows them to diversify their investor base. For example, RZD state corporation has in circulation as many as 5 issues of Eurobonds denominated in Russian currency, with a total volume of 80 billion rubles.
The sector successfully survived the March surge in volatility, fluctuating along with the OFZ market following expectations on the path of the key rate of the Central Bank of the Russian Federation. The rate reduction to the historically minimum level of 5.5% was also ensured by the recent placement of the Veon bond with a coupon of only 6.3% per annum.
Now ruble Eurobonds are traded with an average premium of about 120 bp. p. to the OFZ curve. Note that this is slightly higher than the average premium in the yield of ruble corporate bonds placed on the domestic market to OFZs (90 bp). In our opinion, Alfa-Bank issues with maturity in 2021-2022 look rather interesting, according to which you can fix the yield at the level of 5.7%. For example, an issue maturing in February 2022 with a coupon of 9.25%. Note that the OFZ yield maturing in December 2021 is 4.5%. Thus, the Alfa-Bank ruble Eurobonds gives a premium of 120 bp. n. to the curve of the Ministry of Finance, which seems to be an attractive level in such a short period of duration.
In addition, an additional factor in increasing the comparative attractiveness of ruble Eurobonds is the cancellation of tax privileges in 2021 on coupons on federal loan bonds and corporate bonds issued since 2017. Meanwhile, we note that a natural limit on the interest, for example, of retail investors in ruble Eurobonds is their high minimum lot - 10 million rubles.
Joint Managing Director
Today we will look at one debt security as investment ideas for this week: ABH Financial Ltd
Last week, Alfa-Bank's parent company (ABH Financial Ltd) placed a 3-year eurobond of 350 million euros at 2.7% per annum. The expansion of the line of securities with Russian risk denominated in euros made us pay attention to this market segment. The March crisis did not pass him by: as can be seen in the graphs below, by now global securities nominated in the single European currency have won back about half of the losses. Note that before the March sale, the indices presented on the charts were near their historical highs.
Russian Euro papers were also battered during the March storm. However, like global Eurobonds, they are pretty confident in catching up. For example, a Gazprom issue maturing in 2023, which was trading at 0.6% at the end of February, could be purchased on March 23, 2020 with a yield of 3.0%. Now it is possible to fix the yield at 1.6%.
As for the ABH Financial Ltd. issue placed last week, it is trading at a premium for relatively higher-rated Russian securities (see chart below). Note that the issue looks quite competitive against the background of international Eurobonds with a rating of BB-.
Joint Managing Director
Today we will look at one debt security as investment ideas for this week: Volkswagen AG
Against the background of near-zero deposit rates in euros, the segment of Eurobonds from highly reliable issuers is of natural interest. The so-called “eternal” issues offer the highest yield, however, if we exclude issuers from the banking sector, then the line of Eurobonds of one of the world's largest automakers, Volkswagen AG, is immediately in the focus of attention.
Volkswagen AG's stock market capitalization has been hit hard during the current crisis. On March 20, 2020, the concern’s share price fell to 100 euros apiece, whereas, for example, in January this year it amounted to 180 euros. However, by the current moment approximately half of the March losses have been recouped. Despite the current rebound, the company expects a very significant decline in its revenue performance due to the crisis. However, unlike, for example, American automakers and despite its wide presence in China, Volkswagen AG management does not expect the net operating cash flow to go into the negative area. Note that current market forecasts suggest a fairly active recovery in the financial performance of the auto concern in 2021 (see table below).
The company has negative net debt and very comfortable interest coverage - at the level of 4.2 - even taking into account the forecasted decline in operating profit due to the crisis in 2020 (from 14.6 billion to 7.9 billion euros). In 2020-2021 VW will have to pay off debt in the amount of 13.0 billion and 18.7 billion euros, respectively, while as of March 31, 2020, the amount of cash and cash equivalents on the balance sheet amounted to 44.9 billion euros. In addition, the volume of credit lines opened by the company reaches 11.9 billion euros.
However, in the midst of a pandemic, international lending agencies worsened their forecasts for company ratings, which nevertheless remain at the "investment" level (see table below). The default probability of Volkswagen AG, calculated by Bloomberg, also slightly increased. For example, the probability of default over the next 5 years increased from 1.2% to 3.2%. Nevertheless, even the increased value looks, in our opinion, quite moderate.
Volkswagen AG is an active issuer of eternal securities. Since 2013, the company placed 10 issues (all in euros), one of which was called back in 2018 by call. The total volume of VW eternal securities currently in circulation is 12.5 billion euros.
One of these securities is the junior subordinated Eurobonds, placed in June 2018 in the amount of 1.5 billion euros and a coupon of 4.625% per annum. The issuer was the concern's subsidiary, Volkswagen International Finance N.V. At the same time, it is stipulated that the bonds of the issue are unconditionally and definitively guaranteed on a subordinated basis by the Volkswagen Group. Compared with senior debt, the “eternal” issue has ratings two steps lower, which, however, still allows it to correspond to the “investment” category.
As with most Eurobonds, the coupon on this issue is paid once a year (June 27). The next paper call option is scheduled for June 2028, further calls will follow once a year until 2168. If you evaluate the likelihood of the next call option being realized in 2028, it’s worth noting that the only “eternal "VW Eurobonds was recalled on the very first call. According to the current repayment schedule, in 2028 the company will have to repay a debt of 2.0 billion euros (which is the lowest value since 2020) and also repay an “eternal” paper worth 1.5 billion euros from this point vision should not create any problems. Note that in case of non-recall of the paper on the first call option, the coupon level on it will be recalculated according to the formula = 10-year interest-rate swap in euros + margin (premium) of 398.2 bp. n. If the new coupon were recounted now, then it would be 3.87% per annum (now 4.625%).
As the Eurobond is “perpetual”, the main risk associated with it is directly related to the payment of coupons. The fact is that this bond is “hybrid,” that is, having the qualities of both interest-bearing (debt) and equity securities. As a result, such bonds allow borrowers to defer payment of interest without violating their obligations (in other words, non-payment of a coupon does not entail issuer's technical default). Deferred interest on the issue is cumulative. Note that in contrast to the “eternal” Eurobonds issued by banks, the issue of VW is not possible to write off to compensate for losses.
Now the Eurobond can be purchased with a yield of 4.2% to the nearest call in June 2028. Note that the current yield of the paper (the ratio of coupon payments over the next 12 months to the current price) is 4.5%.
Compared to late February levels, the current VW (perp) release price is about 10 lower. Note that the LBEATREU index (which tracks the Eurobonds of the "investment" rating, denominated in Euros) has fallen much less during the crisis and is recovering
Joint Managing Director
Today we will look at one debt security as investment ideas for this week: VTB
Against the backdrop of Russian Eurobonds yields returning to the range of 3-4%, the segment of securities with high yields from highly reliable issuers is of particular interest. If we take into account the liquidity of the instrument (minimum lot size, availability for an unqualified investor), then the choice essentially becomes no alternative - we are talking about the so-called “eternal” dollar Eurobonds of VTB Group, issued by its subsidiary VTB Eurasia. Now on this paper you can fix the yield to call in December 2022 at the level of 5.8%.
VTB's junior subordinated "perpetual" Eurobonds worth 2.25 billion dollars were placed in July 2012 with a coupon of 9.5% per annum. The main risks associated with it are the issuer's right to not pay the coupon (which will not subsequently be compensated to the holder and which will not entail the issuer's technical default), as well as the possibility of writing off the issue to cover losses. Usually in the prospectus of “eternal” Eurobonds a trigger is prescribed that starts the process of writing off paper. As a rule, this trigger is the first level equity ratio (common equity Tier 1 ratio), the minimum value of which is set at 5.125%. There is no specific trigger level for VTB. Note that since the placement of the Eurobond in 2012, VTB Group's capital adequacy has not fallen below 9% (see chart below).
As for the likelihood that the next call option will be realized in December 2022, it is worth noting that the repurchase of the Eurobonds could put pressure on capital, while VTB still needs it. In addition, in October 2022, VTB Group will have to repay a subordinated issue in the amount of $ 1.4 billion. In this regard, the repayment of the “perpetual” issue in the amount of $ 2.25 billion is unlikely. Nevertheless, significantly increase the likelihood of a call-back withdrawal (if not in December 2022, then, for example, six months after that - call options will follow twice a year) could move on the "sanctioned" field. Recall that, since 2014, VTB has been deprived of the opportunity to attract financing in the Eurobond market. In the case of easing the sanctions, the group could try to replace the “eternal” Eurobonds with a 9.5% coupon with a cheaper issue for servicing, especially since the current market conditions allow this.
Note that in case of non-withdrawal of the paper according to collapse in December 2022, the coupon level will be recalculated according to the formula = ten-year UST + premium 806.7 bp. n. If the new coupon were recounted now, it would be 8.8% per annum, which, obviously, would not give any significant savings in comparison with current payments.
In the first two months of 2020, VTB's issue price approached its historic highs. Having suffered during the March collapse, the Eurobond, nevertheless, was able to recoup about 75% of losses by now, which looks better than the dynamics of the EMUSTRUU index, which tracks the dollar-denominated debt of developing countries (see chart above).
Meanwhile, significant potential for VTB price growth (perp) remains in terms of the z-spread. So, if in mid-January 2020, the premium in yield to US treasury bonds narrowed to 330 bp. p., now it is 570 bp. P.
Due to the issuer's higher credit quality, the VTB Eurobonds are traded with a minimum yield spread compared to their Russian counterparts. Note that although VTB (perp) does not have ratings from international agencies, it cannot be said that it looks cheap against the backdrop of global “eternal” papers (see chart below). The thing is, in general, this segment of high-risk instruments is still far from its "dock" levels. However, the situation is changing right before our eyes - for example, the “eternal” Eurobonds of West European banks have been hastily catching up recently.
Due to the high coupon (9.5%), the level of the current yield of the paper (the ratio of coupon payments over the next 12 months to the current price) of 8.7% looks interesting. As follows from the table below, in terms of this indicator, VTB issue is one of the three in the segment of Russian Eurobonds.
Note that the junior subordinated “eternal” issue of VTB is traded on Mosbirzhe with a minimum lot of $ 1,000. A paper coupon is paid on June 6 and December 6.
Joint Managing Director
Today we will look at one debt security as investment ideas for this week: Freeport-McMoRan Inc.
Freeport-McMoRan Inc., mid-March 2020, lost more than half of its stock capitalization at the beginning of the year. The epidemic has led to a decrease in demand for copper, to a generation of hopes for the restoration of prices for this metal this year. Growth in emerging economies and weakening trade is expected to support prices. However, copper prices began to gradually increase in price, which could lead to a shortage of this metal, Freeport-McMoRan.
Nevertheless, the market expects a decrease in revenue indicators this year with a rather active recovery in 2021. (see table below). Meanwhile, I quarter of 2020 EBITDA and operating income.
Debt repayment schedule Freeport-McMoRan Inc. quite balanced (so, the average maturity is about 9 years). However, negative dynamics leads to a deterioration in credit metrics.
For example, the Net Debt / EBITDA ratio exceeds 4. However, the company's liquidity position looks solid: for example, as of March 31, 2020, it includes $ 1.6 billion. In addition, she had access to credit lines in the amount of $ 3.5 billion.
The Big Three agencies have not been reviewing their issuer ratings for quite some time (see table below). Now a composite ranking of Freeport-McMoRan Inc. two steps below the “investment” (BB), which does not have the most brilliant credit metrics of the issuer. Given the significant “pillow” of liquidity, the probability of a company defaulting over the next 12 months, according to Bloomberg, is only 1%. Note that the default probability of the FreeportMcMoRan Eurobond maturing in 2034. According to the default risk model, Bloomberg, 14%.
With a maximum level of the end of February, the 2034 Eurobond FCX lost about the current percentage, and the American High Yield Bonds Index (LF98TRUU) - about 10%. Interestingly, a year ago, taking into account the fact that it was accepted in the same volume as its obligations under US treasury obligations, it expanded by almost 200 bp during this time. P.
Joint Managing Director
Today we will look at one debt security as investment ideas for this week: GTLK
The issues that have undergone the strongest downward revaluation during the current crisis include Eurobonds of the State Transport Leasing Company (GTLK). On average, 5 issues of the issuer have increased in profitability since March 5 (the eve of massive sales in the markets) 180 b. n., while the average growth in yield in the sector of Russian securities of the 2nd echelon was twice lower. Such dynamics is not surprising, given the high dependence of GTLK financial performance on the airline industry, where some companies may encounter problems when making payments under leasing contracts. Note that in 2019, the air transport sector accounted for 37% of the GTLK leasing portfolio.
Meanwhile, whether the company's bonds will become full-fledged “fallen angels” —that is, whether one can expect a significant deterioration in GTLK's credit ratings amid the current crisis — is an open question. In particular, on April 20, 2020, Fitch Ratings changed its forecast for the long-term foreign currency default rating of GTLK from “positive” to “stable”, however, it confirmed it at BB +. The change in the rating outlook reflects "the significant impact of the global COVID-19 pandemic on the Russian economy, which will exert increasing pressure on the state budget as spending priorities in a number of areas increase." At the same time, leaving the rating level unchanged reflects, according to Fitch analysts, a high probability of government support for the company (in fact, GTLK is 100% owned by the state), while the agency does not see a tendency to weaken it.
Note that GTLK Eurobonds have currently won back about half of the March losses. For example, the price of the shortest issue in the issuer's line - maturing in 2021 - reached face value. However, now the spread in profitability to the underlying asset (480 bp) on this security coincides with its level when placed in July 2016, while then the GTLK rating, for example, from Fitch was two steps lower than the current.
At present, with the GTLK dollar Eurobonds maturing in July 2021, a yield of 4.9% can be fixed, which looks interesting for paper whose default probability over the remaining maturity period is 1.83% (according to the issuer default risk model Bloomberg).
The senior unsecured issue of GTLK maturing on July 19, 2021 has a coupon of 5.95% per annum. The Eurobond volume is $ 0.5 billion. Options for early recall and / or revision of the coupon level are not provided. Note that the issue is available to unqualified investors.
Joint Managing Director
Today we will look at two debt securities as investment ideas for this week: British American Tobacco and Nornikel
Against the backdrop of the flood of markets with liquidity from the Fed, the renaissance in the Eurobond market from the world's largest manufacturers continues. However, price levels at the end of February have not yet been reached, for example, for relatively distant securities, the “shortage” is 10 or more figures. Thus, the markdown for the Reynolds American corporation maturing in 2035 relative to its level of March 5 currently reaches 15 figures.
The issuer of the bond is Reynolds American Corporation, the second largest cigarette producer in the USA (owning, in particular, brands such as Camel, Pall Mall and Winston), which in 2017 was acquired by British American Tobacco, the second largest producer of cigarettes and tobacco in the market. products in the world second only to Philip Morris International. BAT produces 700 billion cigarettes a year, which it sells in more than 60 countries. He owns 9 global brands, including Dunhill, Kent, Rothmans, Lucky Strike and others. In addition, BAT relies on products with reduced tobacco / nicotine content (vapes, snus, electronic cigarettes), which account for a third of sales. British American Tobacco has a current market capitalization of $ 86 billion.
Now, on the issue of BATS 2035, it is possible to fix a yield of about 5%, which seems to be a very interesting level for paper with a composite rating of BBB.
Although the Eurobond market is quite actively recovering losses after the March sell-off (and Russia is one of the leaders in this regard among large developing economies), the very nature of such a recovery seems somewhat unstable. First of all, the speed of both the collapse of the markets and their subsequent reversal to growth is striking. It is clear that the Fed reacted quite quickly, and expectations of an influx of new, cheap liquidity are pushing the global dollar debt market to new price heights. At the same time, it is still very doubtful that someone will be able to give an accurate forecast regarding the losses that the world economy will ultimately suffer as a result of the coronavirus pandemic still gaining momentum.
In this regard, we draw attention to the relatively short issues of Russian companies in the non-financial sector with a good credit profile. In particular, for those of them that are traded on Mosbirzha and are available to unskilled investors. For example, on the Norilsk Nickel Eurobonds maturing in October 2022, the minimum lot of which is $ 1,000. Now you can fix a yield of 3.3% on this investment tool, which seems to be an interesting level compared to deposit rates in dollars. Note that the current price of paper is about 3 figures below the February highs of this year.
The issuer has already submitted financial results for 2019, which have confirmed its high credit quality. So, the Net Debt / EBITDA metric is 0.9. Cash 2.5 times the short-term debt.
The senior unsecured issue of Norilsk Nickel was placed in October 2015 at 6.625% per annum. Eurobonds amount to $ 1 billion. Options for early recall and / or revision of the coupon level are not provided.
Joint Managing Director
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