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. Last Updated: 07/27/2016

Ministry Announces New Eurobond Issues




The Finance Ministry said Friday it would begin presentations next month of its first Eurobonds to be launched since the market crisis, signaling the government is confident international rating agencies will leave Russia's rating unchanged.


The Russian government will begin a road show in mid-March for a Eurobond denominated in Deutsche marks, followed by a presentation in April for another Eurobond in Italian lira, the Finance Ministry said in a statement.


It did not reveal the size, timing or maturity of the bonds, but the government has said it will raise $3.4 million in Eurobonds this year.


Deutsche Bank and SBC Warburg Dillon Read were named lead managers for the mark-denominated Eurobond, while Credito Italiano and J.P. Morgan Securities have been chosen as lead managers of the lira-denominated Eurobond.


President Boris Yeltsin has ordered the government to refrain from borrowing in the first quarter of 1998 due to poor conditions on international financial markets. But the timing of the road shows, which come immediately before Eurobond launches, suggest the Finance Ministry is eager to begin borrowing as soon as possible.


The Finance Ministry has said it is only borrowing on the domestic treasury bill market to service old debt. With tax collection still troublesome, the government needs cash to fill budget holes.


The announcement of the government's Eurobond plans squelched rumors of an imminent downgrade of Russia's credit rating, pushing debt prices up. Eurobond prices rose 0.81 percent Friday to 96.39 on the news.


Representatives of international credit rating agencies Moody's Investor Services and Fitch IBCA were in Moscow this week meeting with senior Russian officials after putting Russia under review for a possible downgrade. A lowering of Russia's credit rating would make it more expensive for the government to raise funds through Eurobond placements.


"The market is now beginning to think that an affirmation of the rating is becoming more likely," said Eric Fine, a Russian and Eastern European debt specialist at Morgan Stanley of London.


An announcement by the Central Bank's first deputy chairman, Sergei Alexashenko, that the bank did not expect a downgrade in Russia's rating also helped put investors at ease.


Analysts were upbeat about Russia's prospects of returning to international markets following the financial crisis of recent months, saying the emerging market debt prices are recovering.


The Ukrainian government successfully issued a Eurobond two weeks ago priced in marks with a yield of 16 percent, showing market appetite is relatively strong, analysts said.