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Demand for NW Telecom's bonds with floating coupon rates 3.2X above supply

On May 27, North-West Telecom placed its fifth bond issue on MICEX for RUR3bn, with Svyaz Bank and Raiffeisenbank as organizers. The placement, an open subscription auction, resulted in a premium of 212bp to the three-month MosPrime rate (6.28% annual as of May 26), with the first coupon fixed at 8.4% annual. Demand exceeded supply by 3.2X. During the auction, investors submitted 90 applications for a total of over RUR9.5bn. The premium to MosPrime indicated in the applications varied from 197bp to 362bp; the entire issue was placed.

«We ascribe this very positive rate for NW Telecom to strong investor demand, who believe in the company's credit quality and find the bond parameters attractive, including the floating interest rate; the result also confirms that NW Telecom meets the investment community?s most stringent requirements. NW Telecom intends to maintain a balanced capital structure going forward, supporting the company?s financial stability and solvency at the highest level,» said Venera Adykhamovna Khusnutdinova, NW Telecom's VP for economics and finance, commenting on the results of the placement.

The placement syndicate included the following co-organizers: Dresdner Bank, Absolut Bank, ING Bank (Eurasia), Novinkombank and Petrokommerts Bank; the underwriters were Kommertsbank (Eurasia), Alfa Bank, BFA, IK Kapital, GC Region, Sberbank, TransCreditBank, and the co-underwriters were FK Otkrytiye, UniCredit Bank, AK BARS Bank, Transkapital, FK Uralsib and IK Russ Invest.

The term of the new bonds is five years, with coupons paid quarterly at a rate equal to three-month MosPrime on the last day of each coupon period and a premium of 212bp, as determined at the auction; the coupon rate is not to exceed 15% annual. The terms give the issuer the right of early repayment on the bonds on the day of each coupon payment, beginning with the eighth coupon at a price of 100.25% of face value. All bondholders can present the bonds for buy-back in two years at face value.

Raiffeisenbank is recognized as a leader on the Russian corporate bond market. In 2001-2008 Raiffeisenbank acted as a lead manager or co-manager for 136 corporate bond issues with a total nominal value of RUR 423 billion.

ZAO Raiffeisenbank is a subsidiary of Raiffeisen International Bank-Holding AG. Raiffeisenbank is the largest foreign-owned bank in Russia, ranking 7th in terms of assets among top Russian banks based on 1Q 2008 results (Interfax-CEA). Raiffeisenbank is ranked 8th in terms of corporate lending based on 1Q 2008 results (Interfax-CEA). According to Interfax-CEA, ZAO Raiffeisenbank ranked 4th in Russia in terms of private deposits and 6th in consumer lending in Russia based on 1Q 2008 results.

ОАО Svyaz Bank was incorporated in 1991, holds CBR general license No. 1470,and is one of Russia's 20 largest banks.

Svyaz Bank, a participant in the mandatory insurance deposit system, has a network of 49 branches in Russia's regions. The bank is actively developing its investment banking operations, including corporate finance and services for private clients.

Moody's rates Svyaz Bank B2 and NP for long-term and short-term deposits in foreign currency and rubles, respectively, and gives the bank a financial stability rating of E+. The Moody’s Interfax Rating Agency gave the bank a long-term credit rating (national scale) of

ОАО North-West Telecom is the largest and only universal fixed-line telecoms operator in its region. The company has 10 subsidiaries and offers a wide range of telecommunications services, including local and long-distance telephony, data transmission, Internet access, channel leasing, and other services. The company provides access to intercity and international LD operators holding the requisite licenses.

The company's license territory includes the entire Northwest Federal District (1.7mn sq. km), which is home to 13.6mn people. The installed capacity of the company's telephone network exceeds 5mn numbers; digitalization of the local network stands at 61.5%. The installed capacity of the company's broadband equipment is nearly 500,000 xDSL ports.

ОАО North-West Telecom is developing dynamically and providing investors with stable returns. The company's revenue is increasing every year, reaching RUR23.6bn in 2007; NW Telecom is one of Russia's 100 largest companies in terms of market capitalization, which currently exceeds USD1.3bn.


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