On January 28 Sibirtelecom opened two credit lines in Sberbank which totalled RUB 1 bn, or around USD 40 mn. There was only one participant in the tender to choose a credit organization. This fact determined the choice. The credit lines are opened for three years, while the interest rate is 10.2%.
It is notable that this credit looks to be very expensive for the company. The interest rate is much higher than the rates of the credit lines that were opened in Sberbank only half a year ago, in June 2007 (RUB 860 mn, RUB 800 mn and RUB 340 mn at 7%) and in VTB (RUB 800 mn at 8.3%). The starting threshold indicated in the tender documentation is MOSPRIME+2.8% or 7.65% at the present time. Three bond issues placed by the company are floating in the stock market. Their redemption yield is 7.33%, 7.97% and 7.47% (for this issue yield-to-put is indicated).
We believe that the growth of credit interest rates is a result of the credit crunch in the global market and the impact on the company’s value might be very strong. However, it would be possible to draw a conclusion about the scale of the impact only when the company recognizes the growth of borrowing cost in its financial statement. Still, we already can talk about the negative effects of the interest rate growth on the telecom business.
We do not revise our BUY recommendation for commons and preferreds until the disclosure of the company's financial results. The fair values are USD 0.15 and USD 0.1, respectively.
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