The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.


All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.

Germany unlocks Russian Paris Club debt

quotes-03.gif

The Federal Republic of Germany?s securitization of e5 billion of Russian Federation Paris Club debt is a landmark transaction.

The deal creates the largest ever emerging-market bond. Arranged and underwritten by Goldman Sachs and Deutsche Bank, it provides Germany with over e5 billion of revenues while shifting the risk that the Russian debt represents off its balance sheet.

Germany sold $2.4 billion of 10-year dollar-denominated bonds, e2 billion of three-year floating-rate notes, and e1 billion of five-year fixed-rate notes. An SPV, Aries, issued the notes, which were rated BB+ by Standard & Poor?s and Ba2 by Moody?s. Russia?s payments to Germany are transferred to Aries through amortization payments. Aries makes equivalent payments to German development bank KfW. KfW hedges its obligations and then pays Aries money to cover principal and interest payments to the bondholders.

The bondholders have taken the risk because, if the Federal Republic notifies certain defaults by Russia, they can only recover 20% of the principal on each note.

The question now is, what scope is there for more of these deals? The appeal of monetizing debt that until now has been locked up on sovereign balance sheets doesn?t extend to every potential issuer.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree