Pi Capital
Date of publication: 25 October 2019
MARKET SIGNALS: october 22


Today we will look at two corporate debt securities as investment ideas for this week: Minfin and British American Tobacco


In the relatively high-rated segment, we note one of the Eurobonds of Reynolds American Inc., the second largest tobacco producer in the United States. The issuer owns brands such as Camel, Pall Mall, Kent and Winston. The company employs 5.5 thousand people. In 2017, Reynolds American Inc. was fully acquired by British American Tobacco (BAT), with a current market capitalization of $ 79 billion. BAT is the second largest tobacco producer in the world, second only to Philip Morris International.The senior unsecured issue with maturity on August 15, 2035 in the amount of $ 750 million was placed in June 2015. The issue market is global. One call option is provided on paper six months before maturity. There are no options for revising the coupon level (5.7% per annum). The face value and minimum lot on paper are respectively 1 thousand and 2 thousand dollars.Note that BATSLN 5.7 08/15/35 looks very competitive against securities of comparable credit quality.


The boom in the primary market does not yet affect the segment of Russian sovereign Eurobonds. This is due to the fact that the domestic Ministry of Finance has already fulfilled the non-ruble borrowing program in 2019 with a margin. In addition, the US sanctions imposed on the Russian sovereign dollar debt also play a role. However, any restrictions lead to a shortage of securities, and interest in Russia's obligations, given its strong credit profile, is very high.Recall that, unlike corporate Eurobonds, currency revaluation and NKD on the obligations of the Ministry of Finance of the Russian Federation are not subject to personal income tax. Of particular note is the issue with maturity in 2028, which, thanks to its double-digit coupon rate, offers the highest current yield (the ratio of coupon payments expected in the next 12 months to the current market price) in the entire segment.Alexey Shternshis
Joint Managing Director
Сapital Pi

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