Russia goes on road to debunk debt ‘myths’

24 April 2009

Euroweek Issue: 1101 - 24 April 2009

Russian ministry of finance officials this week confirmed plans to conduct an investor roadshow later this year, as part of plans to improve Russia’s image among international accounts and "dispel misperceptions about the country’s so-called excessive debt burden."

The roadshow will precede the sovereign’s plans to return next year to the international capital markets for the first time in almost a decade. However, Konstantin Vyshkovskiy, head of the ministry of finance’s debt department, would not be drawn on the likely size, maturity or timing of the deal, although he pointed to Abu Dhabi and Qatar’s recent $3bn dual tranche five and 10 year issues as examples of successful sovereign issues.

Russia’s foreign debt has been exaggerated by analysts and ratings agencies, Vyshkovskiy told attendees at VTB Capital’s Russia conference on Tuesday. By the end of 2008, state foreign debt stood at just $30.5bn, around 7% of the country’s total foreign debt as at April 1. Corporate foreign debt stood at $423bn at the beginning of April, but around two thirds of this was long term debt.

"Russia has no need to turn to the global markets to stabilise the economy," he said. "We may need to raise foreign capital to achieve other goals, for example, establishing new sovereign benchmarks for other borrowers, and strengthening the perception of Russia as a reliable borrower."

The private sector has $136bn of debt repayments in 2008, 16% of which is interest, Vyshkovskiy said. But, he argued, Russia’s first quarter trade surplus of $21.7bn and foreign currency reserves built up by banks and companies during the boom years should reinforce the private sector’s ability to service its foreign debt. "These repayments should not be seen as unmanageable for the Russian economy," he added.

The authorities have ruled out providing state guarantees to companies issuing debt in foreign markets. A Russia specialist this week said this policy was to avoid a back-up in the sovereign’s CDS.

The sovereign was last in the international capital markets in 2000 when it printed a 2030 Eurobond to refinance Soviet-era borrowing. That deal is today Russia’s only liquid bond.

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Natalia Cherepova
Corporate Communications VTB Capital