Monday, 13 April 2009

VTB chief quells Gazprom bond hopes

Financial News

Jason Corcoran in Moscow
03 April 2009

The head of Russia’s state-controlled VTB Bank, Andrei Kostin, has told Financial News that energy giant Gazprom’s placing yesterday of a Sfr400m ($351m) Eurobond will not open the market for the wider economy.

Russia’s foreign banking debt amounts to about $500bn (€370m), with $130bn due to mature this year. Gazprom’s bond sale represents he first international corporate debt issue from the country in nine months.

Russian issuers are hoping the placement could help unlock the Eurobond market for other borrowers, who are currently engaged in restructuring negotiations with western creditors.

But Kostin, the chief executive of Russia’s second lender VTB, said he didn’t see the international bond market opening up beyond large oil companies.

In a Moscow media briefing, Kostin told Financial News: "Gazprom is on a roadshow at the moment. If it’s successful, it could lead to the opening of the international credit markets for Russian issuers. But I think it will only open for oil companies and it's too soon to see unsecured borrowing to take place for the rest of the economy. I don't see anything opening this year in terms of lending from the west."

Gazprom, Russia's most indebted company with consolidated outstanding debt of $60bn, last tapped the market in July 2008 with a $500m five-year bond priced at 7.51%.

Earlier this month, the Russian government warned it will not take on the debt burden of companies that are under stress, but will support their restructuring negotiations with lenders to ease funding pressure on the corporate sector and minimise debt defaults.

Bankers from VTB and Otkritie are involved in restructuring distressed companies in the financial and real estate sectors. VTB is set to take a 51% stake in London-listed Sistema Hals for $2 in exchange for cancelling the property developer's debt.

VTB and rival state lender Sberbank could become Russia's largest property portfolio owners as loan defaults increase and the banks are left with the collateral. However, banking insiders suggest they might have to wait five years to recoup their loans.

VTB, which last week took a 20% stake in Moscow brokerage Otkritie, is understood to be looking at banking targets in Wall Street and in Asia.

Kostin said VTB’s international expansions is continuing unheeded by the crisis. He added: "Now, we are opening in May in Kazakhstan where we had a meeting last week about getting a licence for our operations. We have a branch in Dubai opening in June which will report to VTB Capital in London."

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