January 12, 2005 |
|Investors should consider reducing their positions in Russian oil major Sibneft's bonds due 2007 to a market weighting, JP Morgan said in a research note on Wednesday. |
"We are reducing our overweight recommendation of Sibneft '07 following a 99 basis point tightening since December 23 when we last published Russian Corporate Strategy," JP Morgan strategist Tatiana Tchembarova wrote.
At the same time, however, Tchembarova said Sibneft's bonds due 2009 should be maintained as an overweIght position despite having tightened by 59 basis points over the same period. These bonds could tighten by another 15-25 basis points, she wrote.
"We view Sibneft '09 as undervalued given that, in our view, the risk skew is positive on the likely continued separation from Yukos and the company's declining net leverage," the note said.
Sibneft's U.S. dollar-denominated bonds due 2007 traded down 0.190 points to bid 107.790, yielding 7.366 percent. It's bonds due 2009 traded down 0.140 points to bid 107.860, yielding 8.392 percent in late London trade, according to Reuters data.
Prior to the break-up of oil major YUKOS and the sale of its main operating unit, Yuganskneftgaz, in a controversial auction back to the Russian government, the company was in the process of merging with Sibneft in a deal valued at $11 billion.
Millhouse Capital, an investment vehicle of Sibneft's core shareholders, led by Roman Abramovich decided to unwind the merger soon after YUKOS chief Mikhail Khodorkovsky was arrested in Oct. 2003 on tax and fraud charges.
"We will additionally continue to monitor the developments around the company's ownership structure closely as a definite separation from Yukos could trigger an S&P upgrade," the note said.