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Troika Dialog looks to expand its horizons with first issue of Russian structured notes

June 20, 2009 EuroWeek

Russian investment bank Troika Dialog closed the book on the R176.6m debut sale of Troika index bonds on Monday. It is the first ever Russian domestic issue of an RTS-index-linked note. The RTS is one of the main Russian stock market benchmarks.

The self-led notes, which incorporate a 1.5 year put option, were issued by special purpose vehicle Troika Invest.

Funds from the issue will be invested by Troika in high-grade Russian bonds and RTS-index options.

The notes were sold to 326 investors.

"The placement took place exclusively among individual clients via Troika’s distribution network in 25 Russian regions," said Andrei Zvezdochkin, director of personal investments at Troika Dialog group.

The bond’s return is calculated by multiplying increases in the RTS index, which is nominated in dollars, by a pre-agreed percentage established during marketing of the bond.

If the RTS index drops, bondholders will receive the bond nominal upon redemption plus a minimal fixed coupon of 0.01%.

On Tuesday, the issuer fixed the dependence coefficient for the bonds at 45%. Delivery of the bonds to investors’ accounts will begin on June 18. The bonds will circulate in the OTC market as typical rouble bonds do.

"The Troika Index Bonds is a new financial instrument in the Russian capital markets aimed at retail clients, which allows an investor to guarantee the principal investment with a potential upside linked to the performance of the Russian Stock Exchange (RTS)," said Pavel Sokolov, managing director and head of debt capital markets and structured products at Troika Dialog Group. "The bonds meet the needs of our clients in the current market environment."

When the market began to stabilise recently, some investors identified an attractive opportunity in buying Russian equities but were not willing to risk losing capital on that market. However, a recent change in legislation made it difficult to find that sort of exposure.

"Previously, Russian investors were offered similar instruments to these based on English law," said Sokolov. "However, last month the Russian securities legislation was changed to prohibit the offering of foreign-issued securities to unqualified investors. Our issue fills this void."

The issuer claims the notes were sold primarily for relationship reasons with no funding raised during the transaction.

"The issue opens wide horizons for structured products under Russian law. We think the placement was a success and we are planning future placements for our clients as well as new investment strategies," said Sokolov.

Company — Sber CIB
  • Full name
    JSC Sberbank CIB
  • Registration country
  • Industry
    Financial institutions