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By Katya Golubkova and Oksana Kobzeva
MOSCOW, Nov 24 (Reuters) - Russia's largest oil producerRosneft is to return to the country's domestic bondmarket after a two-year absence with a programme worth 1.071trillion roubles ($16.6 billion), the company said on Thursday.
Rosneft, which is preparing to buy 19.5 percent of its ownshares from the state in a share buyback deal worth around 700billion roubles, said that the money raised from the bonds mightbe used for overseas projects, new upstream business and plannedrefinancing.
A Rosneft source said the company has no plans to use bondproceeds to finance the potential share purchase from its parentcompany, the state energy holding Rosneftegaz. Rosneftegaz holdsa 69.5 percent stake in Rosneft.
"There is no intention, no goal to use funds any other way(than for overseas projects, new upstream business and plannedrefinancing)," the source said. A Rosneft spokesman declined tocomment.
A government decree earlier this month ordered the sale of a19.5 percent stake in Rosneft, held by Rosneftegaz, to befinalised by Dec. 5, with the budget receiving the funds byend-2016. It did not stipulate a buyer, but Rosneftis widely expected to buy the stake itself.
A Rosneft spokesman declined to comment on the timing, sizeof the first bond and whether the bond proceeds can be used tofinance Rosneft's own buy back. The bonds issued under theprogramme would have a maturity of up to 10 years.
The company also said its subsidiaries would be able to buyits bonds as part of the programme.
Rosneft also said on Thursday its board had approvedGazprombank as the arranger for the bond issue and the bankmight buy up to 173.2 billion roubles in Rosneft bonds. AGazprombank spokesman declined to comment.
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Rosneft, which is under Western sanctions over Moscow's rolein the Ukraine crisis, faces limits on raising funds outsideRussia.
A large Rosneft bond issue at the end of 2014 coincided witha steep slump in the rouble, with the deal later facing criticsfrom the Russian central bank governor as non-transparent.
Russia's central bank declined to comment on Thursday on thepossible effects of a new Rosneft bond programme on thecountry's money and forex markets when contacted by Reuters.
In December 2014, Rosneft had issued 625 billion roubles ofbonds in the domestic bond market. This caused volatility indomestic money market, which had expected the company to use themoney to buy foreign currency. The company said at the time thatproceeds were not used to buy foreign currency.
In January 2015, Rosneft placed another 400 billion roublesin domestic bonds. It has not been active in the domestic bondmarket since then.
Rosneft said in a statement the latest bond programme wouldbe conducted in separate issues taking into the account thetiming of investments and planned refinancing.
The Rosneft source said that the company would decide on thevolume of each tranche according to company needs. The sourcedeclined any details on timing or volume of a first issue.
"There is a repayment schedule and we... have to havecorporate approvals to redeem and refinance (our) debt onschedule," the source said.
Rosneft net debt stands at $26.1 billion as of the end ofthe third quarter. It has to pay off $3.8 billion in the fourthquarter of 2016 and another $12.9 billion in outstanding debtnext year, according to the company's latest presentation.
Last month, Rosneft signed a deal to buy a 49 percent stakein Indian refiner Essar Oil, in a transaction costingover $3 billion and pending regulatory approvals.
"This (bond programme) is a framework decision, to cover ourneeds in quarters to come taking into account strategic overseasdeals we have had planned," the source said. ($1 = 64.6999 roubles) (Additional reporting by Yelena Orekhova, Vladimir Abramov andVladimir Soldatkin in MOSCOW, Dmitri Zhdannikov in LONDON;Writing by Denis Pinchuk/Katya Golubkova; Editing by JaneMerriman, Christian Lowe and Alexandra Hudson)
