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Russia to repurchase bilateral debt

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by Brian Turner
Russia to repurchase bilateral debt

Russia is near to reaching an agreement with the Paris Club on the nation’s plan to repurchase some of its bilateral debt.

Russia is looking to reduce its foreign debt since growing oil revenues have increased its reserves.

Creditors had been insisting that Russia pay a premium on its repurchase of debt because the debt was extended at below-market rates when the country’s finances were in worse shape than they are now, but one of Russia’s largest creditors agreed in principle last month to an at-par buyback (100 percent of the debt’s face value).

At the same time, comments from the Kremlin have recently suggested that the Russian government would agree to an at-par buyback.

Russia is anxious to repay these debts before its European creditors, needing cash themselves, sell the debt on the capital markets.

Germany, one of Russia’s largest creditors at around $18 billion of the $43 billion that Russia owes, repackaged around €5 billion of Russia’s debt into securities to be sold in the capital markets last year. This move undermined Russia’s bond prices.

The Russian finance minister said on Thursday that a deal with the Paris Club could reduce the proportion of his country’s foreign debt to 50 percent, from around 80 percent at the beginning of the year.

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News posted: May 13, 2005

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