MARKET SIGNALS 21.01.20

INVESTMENT IDEAS 

IDEA #1: SPRINT CORPORATION

Among foreign securities of small lottery with a yield of about 6%, let us pay attention to one of the Eurobonds of the American telecommunications company Sprint Corporation. The issuer is the fourth company in the United States by the number of mobile phone subscribers, according to data as of June 30, 2019 serving 54.3 million subscribers. Headquartered in Overland Park (Kansas). The company employs about 30 thousand people. Sprint Corporation shares are traded on the NYSE with a current market capitalization of $ 20 billion. The issuer is 84% ​​controlled by the Japanese conglomerate Softbank Group Corp., whose exchange capitalization reaches $ 92 billion.

Sprint Corporation's credit standing is in full compliance with its “B” ratings from Moody’s and S&P. The values ​​of the issuer's credit metrics look somewhat elevated, financial indicators - volatile.

Sprint Corporation is a fairly active borrower in the bond market. At present, the company’s Eurobonds totaling $ 22.5 billion are in circulation. Note that the issue with maturity on November 15, 2028 is among the most liquid ones.

A senior unsecured issue of $ 2.5 billion was placed in November 1998. The global market for emissions. There are no options for revising the coupon level (6.875% per annum) before the end of the maturity. Please note that the face value and minimum lot on paper are $ 1,000. Paper is serviced by NSD.

The dynamics of the issue price S 6 7/8 11/15/28 (SPRINT 28) in the past 12 months has been quite volatile - and this is against the backdrop of a steady growth in the industry benchmark. However, since mid-May of last year, the issue has been stably trading above par.

IDEA #2: DEVELOPMENT BANK OF THE REPUBLIC OF BELARUS

One of the papers showing impressive growth rates since the beginning of 2020 is the dollar-denominated Eurobonds of the Development Bank of the Republic of Belarus (RBRB) with maturity in May 2024. Thus, from December 31, 2019, the price of this issue rose from 105.5% to 107.5%. The rise in price of paper occurs against the backdrop of a dynamic growth in the value of dollar debts of the Government of Belarus, which during this period dropped half a percent in profitability.

BRRB was established in 2011 and is fully controlled by the state (the government directly owns 96.2% of the bank and another 3.8% is controlled by the state-owned company Belaruskali). S&P and Fitch agencies hold the issuer rating B with a "stable" outlook. Note that the issuer's rating is sovereign, which reflects the role of the bank as a national development institution, the high probability of state support and the subsidiary liability of the Republic of Belarus for the issuer's debt obligations.

The senior issue of BRRB in the amount of $ 500 million was placed in April 2019 at 6.75% per annum. The issue market is Eurodollar. Options for early recall and / or change of coupon level are not provided. Please note that the minimum issue lot is $ 200 thousand. The Eurobond is serviced by NSD and is available only to qualified investors.

Since the placement, the issue has lost 180 bps. p., which was mainly due to a decrease in its credit spread (110 bp). In general, a combination of moderate duration and a 4.7% return is noteworthy.

Alexey Shternshis
Joint Managing Director
Capital Pi