The last time the company entered the public debt market was in December last year. It placed a 5-year issue with the volume of 10 bln RUR at an annual rate of 6.95%. To say this is a routine event for a company as big as the Transmashholding. Currently, three issues of Transmashholding bonds worth 20 bln RUR are in circulation. The technical placement of the issue is planned for May 27.
However, given the general downturn threatening the crisis, the event is beyond the ordinary. It turns out that Transmashholding, despite the reduction of transportation, shows confidence in the future. Purchases of rolling stocks and locomotives by Russian Railways were confirmed at the highest level, and the company's investment program remained unchanged. No matter how deep the decline in transportation may be, Transmashholding products turned out to be, in consumer marketing language, "durable goods".
Transmashholding enterprises were stopped due to COVID-19 restrictions, but the management was able to restart productions swiftly as the restrictions being lifted.
In long term perspective, the manufacturer of machinery turns out to be more stable than, for example, an operator, whose performance depends heavily on the current situation. It seems that the demand for paper is secured in advance, and there should be no surprises. The placement is organized by the state-owned VTB Capital and Gazprombank. This is not the first time they have done it, they know potential clients and their interests.
If Transmashholding refused to raise funds now, it could show the pessimistic mood of the company's management. And that the management might have additional information due to close ties with the Ministry of Transport and the Department of Transport and Development of Road Transport Infrastructure of Moscow. The continuation of the financial and production program should inspire other market participants with restrained optimism.
At the end of April Fyodor Dytynko, Director for External Relations of Transmashholding, voiced the companie's needs at the meeting of the subgroup Regulatory regulation of industry and improvement of the procurement system of the State Council of Russia's working group in the Industry section:
"Enterprises of railway engineering are now at risk due to the cessation of passenger and freight traffic caused by unfavorable economic conditions and global measures to counter the spread of the COVID-19 pandemic. In this regard, we have proposed a number of measures aimed at overcoming the current situation. They can be roughly divided into three blocks.
It is extremely important to close 350 bln RUR deficit of financing of the investment program of the Russian Railways for this year.
The first is to maintain demand from the government and large companies. One of the possible measures to support the Russian industry is the formation of demand from the state for machine-building products, which due to the high depth of cooperation has the greatest multiplier effect on the Russian economy. An example of this is the railway machine-building industry, which has 5-7 levels of value added formation. As a result, each ruble invested in railway machine-building products gives more than 3 rubles in related industries and more than 40 kopecks of tax deductions. Over the last five years the industry enterprises have already invested 140 bln RUR and are planning to invest another 130 bln RUR by 2025.
The next block is export support. To support it, the most attractive tool is lending to foreign buyers of Russian engineering products. This can be implemented through the allocation of funds to Roseximbank and other banks for a long-term (up to 15 years) preferential loan not exceeding 1% per annum in EUR, including the insurance premium.
The third block is to maintain financial stability. General decline in economic activity, growth in the cost of loans, changes in the exchange rate, restrictions in the work of enterprises have a negative impact on the current financial condition of machine-building activities. One of the most effective measures of support may be subsidizing up to 100% of loans for working capital replenishment. This will make it possible to restore payments along the entire chain of cooperation, to ensure the sustainability not only of the manufacturing enterprises that receive these loans, but also of suppliers and contractors.
The first request - Russian Railways stability of demand- was satisfied. The other demands look quite immodest, and it is clear that decisions will be taken gradually. Meanwhile, Transmashholding is implementing its own financial program.
Transmashholding is the largest Russian manufacturer of rolling stock for rail transport. The Group's enterprises are located in St. Petersburg, Bryansk, Penza, Tver, Moscow, Rostov and Saratov regions, as well as in Ukraine and Kazakhstan. The service unit is represented by Locomotive Technologies Group. The company has a 79.4% share of businessmen Iskandar Mahmudov and Andrey Bokarev, as well as Dmitry Komissarov, a member of the group's Board of Directors, and Kirill Lipa, CEO. The latter two are controlling shareholders. 20% of TMH is owned by the French concern Alstom.
Author: Anton Petrov
Made in Russia // Manufactured in Russia