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EuroChem to raise $300 mln in debut bond sale

EuroChem, the world's seventh-largest fertilizer producer, plans to sell $300 million in bonds to foreign investors as it seeks to expand production and develop new fields.

The five-year notes will yield about 8%, bankers involved in the transaction said. Citigroup Inc., UBS AG and ING Groep NV, the sale managers, may stop taking orders for the Moscow-based company's debt as early as today, said the bankers, who declined to be identified. EuroChem, Russia's largest producer of nitrate and phosphate fertilizers, plans to invest $1.5 billion over the next five years to develop the Gremyachenskoye potash field, Russia's fourth-largest deposit with 1.2 billion tons. It also plans to upgrade its fleet of rail cars and other parts of its business. „The pricing is very generous for investors,” said Alexei Boulgakov, an analyst at Aton Capital Group in Moscow. „There will be good demand for the bonds as the company has good cash flows and little debt.”

EuroChem is offering a higher yield than other Russian commodity producers with similar ratings amid concerns over rising gas prices. Profit declined 21% in the first nine months of last year to $190 million on higher prices for electricity and natural gas, which account for 70% of the company's costs, according to the prospectus for the bonds. Russia, the world's largest producer of natural gas, plans to keep increasing domestic prices for the fuel in accordance with WTO demands, crimping EuroChem's profit margin.

Eurochem's bonds are rated BB- by Standard & Poor's and Fitch Ratings, three levels below investment grade. OAO Severstal's $375 million of 9.25% bonds maturing in 2014 yield 7.73%. The bonds of Russia's largest steel producer are rated the same as EuroChem's. Russian billionaire Andrei Melnichenko will own 100% of EuroChem following a breakup with long-time partner Sergei Popov. Melnichenko, whose net worth is valued at $4.6 billion, will hand over his stake in MDM Bank to Popov.

Bondholders cut the yield premium on developing nation bonds by 1 basis point today to 1.79 percentage points over Treasury yields, according to JPMorgan Chase & Co.'s EMBI Plus index. The spread has declined 13 basis points in the past week. A basis point is 0.01 percentage point. JPMorgan's index of dollar-denominated debt sold by Russian companies fell 0.14% March 9, down from a record high it reached on March 8. The index has returned 8.6% in the past year. Russia's currency, the ruble, rose 0.22% to 26.18 per dollar at 11:45 a.m. in London. It fell 0.27% to 34.51 to the euro. (Bloomberg)