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Creditors Will Get Record Payments

February 06, 2008 | www.kommersant.com

In the first quarter of 2008, Russian banks and companies will pay foreign creditors $35 billion, of which $31.2 billion will go against principle, and $4.7 billion will be interest. Data released yesterday in the Central Bank analytical publication “The Payment Balance and Foreign Debt of the Russian Federation” indicate that payments on the non-state debt will reach a peak this quarter.
That peak will amount to less than 10 percent of the total foreign debt and would not normally present a problem for anyone. However, continuing instability on world financial markets has caused a sharp drop in the accessibility of credit resources. As a result, some companies may encounter difficulties refinancing their debt.

The problem is mainly local in nature. On October 1, 2007, the last date for which data are available, the total foreign debt of the Russian Federation was $430.9 billion, or about 35 percent. By world standards, that is low foreign debt. Banks account for $147.7 billion of that amount. The state foreign debt is extremely small, just $39.6 billion. The temporal structure of the debt would also not case alarm under normal circumstances. The banks are expected to repay 24 percent of their debt in the course of this year and 15 percent of it next year. Other debtors will pay 30 percent and 17 percent of their debts, respectively.

Amendments to the Budget Code that came into force on January 1 allow the government to place temporarily free federal budget funds state corporation funds from the Federal Treasury in commercial banks in amounts not to exceed 2 trillion rubles altogether. That will cover any possible shortfalls in Russian companies' money flows. These estimates are based on data from last October 1, however. The Central Bank's statistics do not take into account possible credit covenants that could convert long-term credit into short-term.

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