January 26, 2018 / 1:54 PM / a year ago

U.S. investors load up on Russian debt despite looming sanctions: Phosagro

DAVOS, Switzerland (Reuters) - U.S. and European investors are loading up on Russian debt despite a looming threat of new U.S. sanctions on Moscow as they warm to the Russian corporate story amid a renewed commodity boom, the head of Russian fertilizer giant Phosagro said.

Phosagro placed a $500 million eurobond this week at a coupon rate of 3.949 percent, its lowest ever. Also this week, Russian aluminum giant Rusal and gold producer Polyus sold $500 million in bonds each.

Washington is expected to impose fresh penalties against Russia as soon as early February for its alleged meddling in the 2016 U.S. presidential vote. Russia has repeatedly denied this.

Andrei Guryev, chief executive of Phosagro, said his bond was five times oversubscribed with 92 percent of investors coming from Western countries, including 41 percent from the United States.

“I have never seen anything like that in terms of interest and appetite for our debt,” Guryev said on the sidelines of the World Economic Forum in Davos.

“It shows that U.S. business is voting with the money. It shows that U.S. and European investors believe and buy the Russian corporate story and don’t really buy into the sanctions story,” he said.

“It also happens as the commodities markets are booming. Oil, coal, fertilisers - they have all gone up,” Guryev said.

He said the outlook for the fertilisers market was getting stronger as China was closing more loss-masking facilities because of a coal price rally amid its fight on pollution.

A general view shows the congress centre (C), the venue of the World Economic Forum (WEF) in Davos, Switzerland January 26, 2018. REUTERS/Arnd Wiegmann

“The oversupply capacity is shrinking while demand is rising,” he said adding that he saw 2018 prices for key fertilizer diammonium phosphate (DAP) strengthening to $380-$400 per tonne versus the current $350 a tonne.

“This price strengthening is fundamental and is here to stay. Phosagro has passed its capex peak and is turning into a cash generation machine,” he said.

He added the company was targeting annual production growth of 10 percent for the next years which could help it to double in size by 2025 from current production of 8.4 million tonnes.

Reporting by Dmitry Zhdannikov, editing by David Evans

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