URSA Bank (URSAP, Ba3/--/B+) announced yesterday a buyback programme on its Loan Participation Notes maturing in May 2009. Currently USD 351 mn of above mentioned bonds are outstanding. According to URSA, liquid assets comprised 19% of its total assets at 19 September 2009.

 

The bond is offered at 95 or Z-spread of 1423bp (23 September 2008, 12.46 pm Vienna time). We believe that the bank wants to use an opportunity to cheaply repay its debt which anyway matures in less than eight months. However, we doubt that URSA will be able to repurchase much of the outstanding volume. Russian corporate Eurobond market remains largely illiquid and we question the investors’ willingness to sell short-term bonds at current distressed pricing.

 

We see no significant impact on the spreads of two outstanding EUR-denominated bonds from this news, while a minor spread compression in URSAP 9% due 05/2009 cannot be ruled out.