Russia's first publicly rated future-flow deal is coming. On roadshow last week in Europe and this week in the U.S, Gazprom International is expected to tap US$1 billion from many of the same investors that purchase export-backed deals from Latin American originators, sources said. ABN AMRO, Merrill Lynch and Morgan Stanley are jointly leading the deal, which is understood to be the first in a program.  

While potentially unfamiliar to corners of the U.S. ABS market, the gas exporter is a well-known commodity to corporate investors, banking circles and energy players in Europe. "Its asset base is incredibly huge," said Tim McCarthy, chief investment officer at Moscow-based Troika Dialog Asset Management. The company, he added, owns about 35% of the world's natural gas reserves and raked in US$27 billion of revenues in 2003.  The company has already issued corporate bonds and, even though the current deal will be its first secured export note (SEN), the company has already tied exports to a sizable amount of debt. Last year, exports secured about a third of debt assumed in 2003, according to Standard & Poor's.

The SPV of the transaction, Gazprom International, is located in Luxembourg. As part of the deal, the vehicle will extend a loan to the company equal to the volume of notes. The loan, in turn, is guaranteed by existing and future export receivables linked to two customers headquartered in Western Europe, the Netherland's Nederlandse Gasunie and Italy's ENI. The legal final maturity of the deal is 15 years, but the actual terms of issuance will vary. The notes, trust deed and guarantees will be governed by English law.

Fitch Ratings and S&P both rated the transaction BBB-', three notches above S&P's corporate rating and two notches above Fitch's.

Rather than a true sale, the receivables secure the loan. Nevertheless, the agencies perceive enough distancing from Gazprom's default risk to justify the investment-grade rating. The enhancement also elevates the structure to a rung above the Russian sovereign ceiling, which S&P and Fitch maintain at double-B plus.

Official price talk hadn't surfaced as of press time, but sources doubt that the deal would come tight to the sovereign, despite the higher rating. The tremendous liquidity of Russia's foreign bonds would probably offset their slightly lower credit standing.

The deal is the first of a program of an undisclosed size. Other obligors could be involved in future issuance, sources said.

The company accounts for roughly 20% of the world's gas output.

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