UPDATE 3: TMK to sell shares at 75 rbl/paper in SPO, raise 10.4 bln rbl

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MOSCOW, Feb 3 (PRIME) -- Russian oil and gas pipe maker TMK plans to sell 139 million common shares at 75 rubles per paper during a secondary public offering (SPO) to raise about 10.417 billion rubles from the placement, the company said in a statement on Friday.

On Tuesday, TMK said it launched the SPO to offer up to 139 million common shares corresponding to 13.44% of the company’s capital. Initially, the company guided investors for a pre-market placement price of no less than 74.5 rubles per security, but during bookbuilding it narrowed the guidance to 74.5–75 rubles. The bid book closed at 7.00 p.m. Moscow time on Thursday.

On Thursday, a banking source told PRIME that the bid book was oversubscribed at 75 rubles per share.

“We believe that the SPO is successful, as the shares were valued above the initially price. We attracted a large amount of new foreign and Russian investors. We expect the SPO to increase liquidity of our shares in the future, which will have a positive impact on our shareholders,” TMK said citing CEO Alexander Shiryayev as saying.

Deputy CEO for Strategy Vladimir Shmatovich said during a conference call that foreign investors bought about 80% of the shares TMK offered during the SPO. Interest in the shares was shown by investors from the U.S., Europe and Asia, and TMK attracted more than 60 new investors through the SPO, but no anchor investors came.

“Large funds participated in the deal, but they participated without special preferences. We had no definite goal to sell the shares to a limited number of hands. So, we had large funds, but not the funds that could (account for) one third of the deal or half of the offer,” he said.

The company’s subsidiary Rockarrow Investments Limited will sell the shares, and TMK will spend the money to buy back its shares from VTB Bank under an option. The buyback volume will not exceed funds raised in the SPO. In the future, the company plans to transfer these shares to the majority owner TMK Steel Holding Limited, which pledged not to sell them in at least 180 days after the SPO.

Credit Suisse, Morgan Stanley, VTB Capital and Aton act as organizers of the placement.

Shmatovich also said that the company plans to allocate up to U.S. $10 million it will raise from the placement to repay debt, but all the money exceeding the debt redemption sum will be left at the company’s disposal.

The company’s main goal is to cut the ratio of the net debt to earnings before interest, taxes, depreciation and amortization (EBITDA) to less than 3x. Today, the company spends almost the entire cash flow to redeem debt, but it expects the cash flow to rise in 2017 due to favorable market situation, he said.

TMK does not rule out a Eurobond issue to optimize the credit portfolio and to cut the cost of financing, but it may also offer ruble-denominated bonds. Still, the terms and parameters of placements have not been defined yet, he said.

In 2015, TMK signed a deal to sell about 10 billion rubles worth of shares to VTB Bank. Shmatovich said previously the bank already owned an 8% quasi-treasury stake in the company, and the shares were sold at a market price. The remaining part of the stake was transferred to the bank in 2016, and the deal’s conditions envisaged the right of TMK to buy the shares back.

(59.9858 rubles – U.S. $1)

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