- Rosatom says prepares for bond issuance in China
- Gazprom receives Chinese credit rating
- Plans follow President Vladimir Putin's visit to China
SHANGHAI/MOSCOW, Sept 8 (Reuters) - Top Russian companies including Russia's vast nuclear corporation Rosatom and giant gas concern Gazprom are exploring sales of yuan-denominated "panda" bonds, company sources said on Monday, as Western capital markets remain closed to Russia.
Russian companies have been cut off from the West's capital markets since Moscow sent its forces into Ukraine in 2022.
Russia's Finance Ministry, however, would prefer for yuan-denominated sovereign bonds to be issued in Russia, not panda-bonds in China, it said in a statement on Monday.
The Finance Ministry is aiming for mainland Chinese investors to have a direct link to Russia via a depository bridge, to increase yuan liquidity in the Russian market, the ministry added.
The Financial Times reported on Monday that China was preparing to reopen its domestic bond market to major Russian energy companies as Chinese President Xi Jinping and Russian leader Vladimir Putin deepen their "no limits" partnership.
When Putin visited China last week, he called for joint financial infrastructure for countries of the 'Global South' and suggested that members of the Shanghai Cooperation Organisation (SCO) should sell joint bonds.
On Friday, Chinese rating agency CSCI Pengyuan assigned its highest AAA rating to Gazprom, which holds the world's biggest reserves of natural gas, paving the way for potential debt issuance in China's domestic bond market.
Rosatom, one of the world's biggest nuclear companies, is also preparing to issue yuan-denominated bonds in China, a spokesman said.
Chief Financial Officer Ilya Rebrov told a Rosatom publication in August that the supervisory board had approved plans to seek funds abroad and said preparations had begun for its generation unit Atomenergoprom to issue bonds in yuan.
Atomenergoprom said in April it had received an "AAA" rating with a "stable" outlook from China's Dagong Global Credit Rating agency.
"In principle, we see interest from the side of Russian bond issuers, not just Rosatom but from others too," Russia's deputy finance minister Ivan Chebeskov said on Monday, according to the country's RIA news agency.
But any Russian bonds will still require approval from Chinese regulators, while the purchasers of any potential Russian corporate yuan bonds would have to weigh the risk of U.S. and European secondary sanctions.
"For China, there has been a risk of being faced with secondary sanctions and there has been hesitancy among Chinese banks of making deals that could be seen as breaking sanctions or diluting their effect," Danske Bank analyst Allan Von Mehren said.
CHINESE 'PANDA BONDS' FOR RUSSIAN FIRMS?
The market for Panda bonds, a Chinese yuan-denominated bond from a non-Chinese issuer, saw record growth in 2023 and 2024, driven by geopolitical tensions, according to Deutsche Bank.
Still, no Russian companies have sold panda bonds since the start of the Ukraine conflict and even before that, just one Russian company, aluminium producer Rusal, had sold them.
Companies have sold yuan-denominated bonds in Russia's own, shallow domestic market while the yuan has become the most traded foreign currency in Russia. But China's bond markets offer a far larger reservoir of capital.
After Gazprom was rated 'AAA', Deputy CEO Famil Sadygov said the rating confirmed "Gazprom's financial stability and indicates the company's strong creditworthiness."
The long-term issuer rating on Gazprom will not necessarily lead to an imminent issuance of yuan-denominated bonds, said one source close to Gazprom with direct knowledge of the situation.
"There is no certainty yet about the bond issue. Receiving a rating gives the opportunity to enter the market when necessary. This is work for the future," the source said.
The issuance will still require approval from Chinese regulators, who will take geopolitical risks into consideration, and the process could take years, according to analyst Kirill Lysenko from Expert RA, Russia's most established rating agency.
"Chinese regulators and financial institutions can at any moment be subjected to increased pressure in the form of secondary sanctions from major Western economies," Lysenko said.
Gazprom's "AAA" rating with a stable outlook was issued just after Russia and China gave their blessing to Power of Siberia 2, a massive gas pipeline project linking the two countries as they seek to reduce economic reliance on the West.
Gazprom cannot raise financing in the United States or Europe but has not been hit with U.S. blocking sanctions. Rosatom is not under U.S. sanctions although its top management have been sanctioned.
In an analysis of Gazprom's outlook alongside its rating decision, CSCI Pengyuan cited "high geopolitical risks".
Writing by Gleb Bryasnki, Guy Faulconbridge and Robert Harvey; Additional reporting by Shanghai Newsroom; Editing by Kevin Liffey and Susan Fenton
Source: Reuters