Russia’s state companies set for crackdown on borrowing
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Foreign Exchange

Russia’s state companies set for crackdown on borrowing

Concerned about growing inflationary pressures, Russia’s government plans to limit the amount state companies can borrow in international bond markets. Julian Evans reports on likely effects on the rouble capital market.

 

Putin: concerned
about inflation
RUSSIA’S SOVEREIGN presence on international debt markets is getting smaller and smaller but Russian corporate debt is a rapidly growing sector. CSFB’s debt capital markets team recently undertook an analysis of the market, finding that Russia’s corporate Eurobond debt is now worth as much as $30 billion, accounting for 57% of the total Russian debt market. That makes it bigger in absolute terms than the corporate Eurobond volumes of most other emerging markets. Of that, about 60% is debt issued by state-owned companies, such as Gazprom, Sberbank and Vneshtorgbank. Sofia Sool, vice-president of debt capital markets at CSFB, says: “Issuance by these entities is increasingly being taken by investors as a proxy for sovereign debt. As the amount of sovereign debt gets smaller, the demand for their debt gets bigger.”

The volume of Gazprom Eurobond new issues, for example, rose from $2.7 billion in 2004 to $5.3 billion in 2005, including $1 billion in new issues by Gazprombank. Spreads on Gazprom’s 2013 issue tightened by 120 basis points in 2005. Vneshtorgbank’s new Eurobond issuance rose from $1.6 billion in 2004 to $2.4 billion in 2005.

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