OJSC «Metalloinvest». Special commentary to the placement of eurobonds.

Evaluating new bond we take into account quotes of close Russian peers of OJSC «Metalloinvest» according to business scale and credit metrics. So, Metalloinvest in 1Q 2011 gained lower revenue compared to Severstal and Evraz. However at the expense of higher activity profitability (37,5%) its EBITDA is the most significant among others. Besides this debt size of Metalloinvest as well as ratio Net debt/EBITDA is the lowest among compared companies.
Issuer’s rating from Fitch is at the level of “ВВ-” with stable forecast that coincides with the same rating for Severstal and Evraz. But rating from Moody’s is “Ba3” with positive forecast. It is one line higher than the same rating for Evraz and one line lower than rating for Severstal.
We suppose that according to credit metrics Metalloinvest and Severstal should have the same ratings and respectively traded at one yield curve. Providing premium for debut coming at public market at the level of 15-20 b.p., fair yield range should be 6,0-6,1% per annum. In case if the loan is placed for 7 years, fair yield should be 6,6-6,7%.