First Soviet Bond Issue in West a Success

The Soviet Union’s first tentative venture into Western bond markets was a resounding success and other issues could follow, the West German-owned bank that arranged the trailblazing deal said Thursday.

Holger Bahl, head of the Bank fuer Kredit und Aussenhandel A.G., reported that the $75 million (100-million Swiss franc) 10-year bond for the Bank for Foreign Economic Affairs of the Soviet Union was well oversubscribed.

“Many Swiss and foreign-owned banks have signed up for the deal, some publicly and others who prefer not to put their name to it,” he said. The syndication was completed Thursday. Public subscription closes Jan. 22.

The bond is the first such public issue for a Soviet borrower, and in view of the strong links between several major West German banks and the Soviet Union, commentators were surprised that the Soviets chose to go to Switzerland.

Several of these banks have long been pressing the Soviets to do a bond offering on the German market, bond market sources said.

“It would have been too political in Germany,” Bahl said. “The Soviets wanted their world premiere to be in conservative Switzerland, which has a better reputation, even if it was more difficult here.”

Bond market sources here said a probable lead manager for such a German issue would be Westdeutsche Landesbank Girozentrale (WestLB), which owns 75% of BKA Bank.

Signing of the Swiss franc bond is due to take place on Jan. 18 in the Dusseldorf headquarters of WestLB, giving opportunity for discussions between high Moscow officials of the bank and WestLB. WestLB declined to comment.

However, the sources said the mark bond would be unlikely to follow immediately and might well be preceded by another offering here.

“A mark bond will probably have to wait until they see how well the Swiss franc bond performs,” one German banker told Reuters in Frankfurt.

A long-running wrangle over repayment of pre-revolution czarist bonds, largely solved in 1986, prevented the Soviet Union from borrowing on the bond market in London, and therefore elsewhere as well. The Soviets instead raised funds through bank borrowings.

An exception was the Soviet-owned Moscow Narodny Bank, which is incorporated in Britain.