Eurasia drilling bonds head for weekly gain on bets for deal nod
By Bloomberg
Eurasia Drilling Co.’s bonds headed for the fourth straight week of gains amid signs the planned acquisition of Russia’s largest oil driller by the higher-rated Schlumberger Ltd. will get regulatory approval soon.
Eurasia’s Drilling’s $600 million of bonds traded at a yield of 7.73 percent at 3:13 p.m. in Moscow, taking the decline in the past four weeks to 167 basis points. Russian authorities said this month Houston-based Schlumberger may gain approval for the deal if it satisfies a list of conditions.
“The anti-monopoly commission has been dropping strong hints that it will vote in favor of the transaction, subsequent to agreed revisions with Schlumberger, and a decision is expected in a week or two,” Richard Segal, the head of emerging-market credit strategy at Jefferies Group LLC in London, said by e-mail. An approval would lead to bond yields falling another 50 to 75 basis points, he said.
Russia’s economy, energy and natural-resources ministries support terms proposed by the Federal Antimonopoly Service for the approving the acquisition, the regulator said this week. The conditions include appointing a Russian citizen to head the local unit. Schlumberger, the world’s biggest oilfield-services company, agreed on Jan. 20 to pay $1.7 billion for a 46 percent stake in Eurasia drilling.
The stake purchase may help the rating on the Russian rig operator’s debt to improve, Egor Fedorov, an analyst at ING Groep NV, said. However, Alexander Griaznov, director for corporate ratings at Standard & Poor’s, said it’s too early to discuss any rating changes. Fitch Ratings Senior Director Maxim Edelson said the agency has no immediate plans for review.
Eurasia Drilling is rated BB+ and BB, respectively, by the agencies, both one level below investment grade. S&P rates Schlumberger seven levels higher at AA-.