June 1 2010, Moscow. – JSC “Aeroflot – Russian Airlines”, as a part of its regular efforts to reduce borrowing costs, has converted its liabilities on the issued three-year ruble-denominated bonds into obligations in Euro.
It has become possible through SWAP deals with banks –currency payments exchange. The deals enable Aeroflot to receive from banks amounts in rubles to cover its payments due for ruble bonds in exchange for the Airline’s obligation to reimburse banks relevant amounts in Euros. Several banks have become Aeroflot’s SWAP deals counterparties including JSC “Alfa-Bank” that acted jointly with one of the leading Western international banks.
According to the Aeroflot Deputy General Director, Mr. Shamil Kurmashov, Aeroflot, as a result of the deals completed, has managed to achieve an unprecedented low effective borrowing rate in Euro of 3,89% for a three year term - the level that has been inaccessible so far for Russian entities in case of direct borrowings at the Euro bonds market. “This is an evidence of the high credit the investment community feels to the current reformation of the Company; Aeroflot is emerging as the center of industry consolidation,” he stressed. The rate granted is at a comparable level with the rate on Euro bonds of the Russian Federation (3,63%) floated for a five year term.
Through these deals Aeroflot has managed also to hedge its currency risks having aligned payment currency on SWAP deals with the Company’s earnings denominated in Euro.