Russia's Transaero plans bond issue to fund expansion

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Russian private carrier Transaero is preparing to tap financial markets for working capital to fund its business expansion plans.

The company intends to issue corporate bonds worth Rb3 billion ($99 million) before 10 October with Promsvyazbank acting as an underwriter. A spokesman for the bank says the bonds will bear interest of 16-18% and offer coupon payments in roubles or US dollars.

Over the following two months, Transaero will carry out a stock split ahead of applying for listing on Moscow's Micex interbank currency exchange. To obtain a stock price evaluation, the airline this week began putting up its shares for indicative trading through the electronic exchange RTS.

Board chairman Alexander Pleshakov suggests Transaero could probably make an initial public offering provided it meets Micex listing requirements and the market situation is favourable.

Citing estimates by independent specialists, Pleshakov says the company was worth some Rb13 billion last March.

Transaero's wholly-owned subsidiary Transaero-Finance, which handles 14% of its shares, tentatively plans to sell 8-10% of the equity next year.

Funds raised on the capital market will be mainly used to increase fleet capacity. Next year Transaero will focus on expanding its domestic scheduled network from 22 to 37 routes.

While Transaero said earlier this year that it would not place orders for aircraft until reaching its domestic expansion targets - a 25% market share in 2011 - Pleshakov now says the airline is looking to acquire up to 10 jets next year. These will include Boeing 737s and 777s, as well as a Tupolev Tu-214.

It plans to increase services from Moscow Domodedovo, St Petersburg and Ekaterinburg, in particular, to cities in eastern Russia. Transaero expects passenger traffic to rise by at least 10% next year.