On May 27, 2008, 5th issue of North-West Telecom bonds was placed (State Registration No. 4-05-00119- À of October 23, 2007.). Svyaz-Bank and Raiffeissen Bank were the issue’s organizers.

The bond issue was successfully floated at MICEX Stock Exchange within one day, and the investors’ demand level was high. During the exchange auction, the 1st coupon rate was defined at 8.40% per year, which is much lower than the coupon rate reference defined before the placement. Therefore, the size of the premium on MosPrime for the entire circulation period of the bonds is fixed at the level of 212 basis points. The rates of Coupons 2-20 will be defined as the sum of the three-month MosPrime* rate to be set on the last day of each coupon period, and the premium size to be defined at the auction. Furthermore, the coupon rate shall not exceed the maximum size of the interest rate set as 15% per year.

During the auction 90 applications were put from investors and total volume of demand exceed RUR 9.5 bln, which is more than three times as high as the issue amount. About 50% of the issue was purchased by foreign investors.

The bonds’ maturity period is five years, and they may be redeemed prematurely if so desired by N.W.Telecom on any of the coupon payment dates in the period from the 728th till the 1729th day from the bonds placement starting date. A two-year offer is provided for the issue, with the offer exercise price according to the par value.

As in the previous issues, stage-by-stage redemption of the bonds is scheduled for the following dates:

• on the 1456th day from the placement starting date, each bond will be redeemed partially in the amount of 25% of the par value;
• on the 1638th day from the placement starting date, each bond will be redeemed partially in the amount of 25% of the par value;
• on the 1820th day from the placement starting date, each bond will be redeemed partially in the amount of 50% of the par value.

The funds from the bond’s placement will be allocated to refunding of short-term debts and improvement of the Company’s liabilities structure, and also to funding of the North-West Telecom investment program.

“The rate set at a level so attractive for N.W.Telecom is attributable to the high demand by investors who have appreciated the Company’s credit quality and attractiveness of the debt’s parameters, in particular the floating interest rate. This also confirms compliance of N.W.Telecom with the highest requirements of the investor community. In the future, N.W.Telecom will retain its balanced capital structure, maintaining a highest level of financial stability and solvency,” comments Venera Khusnutdinova, N.W.Telecom Chief Financial officer

ABSOLUT BANK, ING Bank (Eurasia), NOVICOMBANK, and Bank Petrocommerz JSC were involved in the issue as co-organizers, Commerzbank (Eurasia), Alfa Bank, BFA, IC Capital, GC Region, Savings Bank, and TransCreditBank were as underwriters and FC OTKRYTIYE, UniCredit Bank, AK BARS Bank, Transcapitalbank, FC Uralsib, and IC RUSS-INVEST were as co-underwriters.

Currently, two bonds issue of North-West Telecom (Series 03 and 04) are afloat, for a total amount of RUR 5 billion. All of the Company’s bond issues are included on the RF Central Bank’s Lombard List, are acceptable by the Bank of Russia as security for direct REPO transactions, and are on the A1 quotation list.