OREANDA-NEWS. A reopening of international bond markets for Russian issuers could significantly improve maturity profiles and reduce medium-term refinancing risk for companies with foreign-currency debt, Fitch Ratings says. The European Central Bank's corporate bond-buying programme could add to demand as falling investment-grade yields drive more investors into riskier asset classes such as emerging markets. However, Russian corporates would still probably have to pay a hefty premium.

The Russian sovereign issued USD1.75bn last month in its first international bond issuance in nearly three years. According to media reports, Novolipetsk Steel has seen high demand for a dollar-denominated bond and two other Russian corporates - Sovcomflot and Evraz - were reportedly expected to price dollar-denominated bonds on Thursday, suggesting that the market is reopening. However, a previous thawing that allowed Norilsk Nickel and Evraz to issue bonds late last year proved short-lived and investors are likely to remain cautious due to sanctions.

Russian corporates were active issuers in the international debt markets prior to sanctions starting in early 2014 with annual volumes averaging almost USD15bn in the decade to 2014. The peak year was 2013, with USD32bn of new issuance.

Our analysis of 61 Fitch-rated Russian corporates shows a smooth maturity profile over 2016 and 2017 with no significant quarterly peaks. We estimate Fitch-rated Russian companies have foreign-currency debt repayments of USD20.8bn due in 2016 and USD19.8bn in 2017. However, the broader Russian corporate sector faces more than USD122bn of debt redemptions in 2018 and beyond, based on Russian central bank estimates.

We expect larger corporate issuers will be willing to pay a premium to extend these maturities and reduce refinancing risk if the market reopens. The sectors most exposed to foreign-currency debt are metals and mining, oil and gas and chemicals, all of which generate significant dollar revenues. Domestic-focused consumer, retail and utilities companies on average have less than 20% of their debt in foreign currencies.

Russian companies have felt the implications of the soft economy, weak commodity prices, rouble depreciation, tight domestic monetary policy and greatly reduced capital market options abroad, but Fitch-rated issuers have fared relatively well, with only a few exceptions.

We see liquidity coverage as adequate across the Russian corporate portfolio. In early 2016 we identified 12 issuers that did not have sufficient liquidity to cover 2016 debt-maturities and negative free cash flow. However eight of these issuers are in the 'B' category and the four that are in the 'BB' category benefit from other mitigating factors, such as sub-sovereign and state support.