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Monday, July 24, 2017

Russia has deceived US: our Eurobonds 1.2 billion bought by foreigners

For the first time in three years our country has sold sovereign debt securities (so-called Eurobonds) foreign and domestic investors. A decent sum of money — $1.75 billion. Although initially announced $3 billion But borrowed funds, according to Finance Minister Anton Siluanov, would be enough. “We believe that this is enough. We have no special demand for currency in the country and we don’t need monetary resources. We want to stay in the market, so that investors don’t forget us,” said the Minister.

And especially American investors. After all of the papers, despite the strict prohibition of the administration of Barack Obama, I bought exactly the financial structure of the United States.

photo: Gennady Cherkasov

The last time Russia sold Eurobonds in the international market even in 2013, when the Ministry of Finance has placed such bonds to $6 billion and EUR 750 million. However, it is worth noting that after this, our country has bought Ukrainian Eurobonds worth $3 billion. the debt Kiev had back in December of last year, but refuses to do it until now. Now this conflict is addressed in the Stockholm arbitration.

As of summer 2014 because of the events in Ukraine, we are under strict financial sanctions from the United States and the European Union. But this applies only to the granting of credits to Russia for a period exceeding 30 days. On the issue of Eurobonds are not subject to penalties.

However, although the official ban was not, according to Siluanov, the US state Department has put unprecedented pressure on American and European banks, so they refused to service a new release of Eurobonds of Russia. Special pressure was subjected to European settlement system Euroclear, without which the offering of such securities impossible.

Anton Siluanov indignantly concluded: we are faced with “the telephone right” when one call is decided to participate with the investor in the placement or not.

To place Eurobonds the Ministry of Finance was going before, in February-March this year. But it is hampered by the aforementioned “the telephone right”. Apparently, now these restrictions have been partially circumvented.

Proof of this are two facts. First, the legal consultant of the deal was international law firm Cleary Gottlieb Steen & Hamilton. Secondly, as stated by the head of one of the largest Russian state-owned banks, which placed our Eurobonds, “the geography of their demand — USA, UK, EU, Asia, and, of course, Russia.” According to him, the government immediately set up a task to the Russian participants was not more than a third. As a result, 75% of buyers were foreigners.

In General, among foreign investors had placed debt securities in the amount of $1.2 billion, Another $550 million bought domestic private banks.

From the new issue of Russian Eurobonds is possible to extract several lessons.

The first is to circumvent the prohibitions of Washington and Brussels can and should be.

The second: to sell new issues of sovereign bonds it is possible not through a foreign entity, as it was previously, and through their banks.

Third: the Russian currency liabilities are not as great as it was in the beginning of the crisis. So a lot of dollars, as Siluanov said, we don’t need. It is better to develop the ruble debt market, which has a positive impact on the national currency. Note that Deputy economic development Minister Alexei Vedev predicts that the volatility of “timber” will fall and its rate soon will be in the range of 55-65 rubles per dollar.

Expert “MK” Bogdan Zvarich, an analyst CC “Finam”:

– Placing of the Russian Eurobonds was quite successful. Noted the high demand from residents and from foreign investors. It was posted almost two thirds of Eurobonds, planned for this year.

Negative point, in my opinion, is a final yield, which was in the middle of the proposed corridor and made up 4.75%, worse than our expectations: considering that Russian banks are not inclined to lend to the real sector according to the Central Bank, the volume of loans to economy for April has decreased in the ruble equivalent of 1.3%, and taking into account the strengthening of the ruble exchange rate remained virtually zero – was to be expected that they will show greater interest in government securities and agrees to buy them at higher prices. Perhaps it was because for many investors the announcement of the deployment came as a surprise, they did not have time to analyze the situation and put your application at the lowest prices in the framework announced by the Ministry of Finance of the range.

Sanctions . Chronicle of events

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