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. Last Updated: 07/27/2016

Cash Payments Delayed In T-Bill Swap Program

Holders of Russian treasury bills who applied to convert the worthless paper under a government restructuring scheme will have to wait longer than they were promised to see any cash, officials said Wednesday.

The state had pledged to redeem for cash a percentage of the treasury bills, which were frozen by the government on Aug. 17, within days of filing an application. But the deadline has passed for Troika Dialog, one of the first Russian banks to apply, and the bank still has not received any money.

"The Central Bank promised to pay within five days of the date of application, but we have not gotten anything," said Pavel Teplukhin, head of Troika Dialog asset management. Troika Dialog filed applications on Jan. 11 and 12.

Central Bank officials refused to comment, saying only that the issue would be addressed in talks Thursday.

Analysts and investors said, however, that the Central Bank was probably still hammering out the details of the deal.

"Terms of conversion need additional clarification. Otherwise, one cannot even make an exact estimate of the pros and cons," said Konstantin Demchenko, head of the ruble fixed-income desk at the National Reserve Bank. The NRB has not yet filed any applications.

The T-bill revamp, which was put together by the government after investors cried foul over its decision to freeze the domestic debt market, has also received much criticism. Among the biggest irritants for bondholders is the fact that it puts much of the debt in long-term paper and gives select Russian groups better conversion terms.

Despite the fuss over the terms, the Finance Ministry said Wednesday that investors are continuing to file applications.

"Non-residents have filed applications for conversion of 2.5 billion rubles in GKOs," Finance Minister Mikhail Zadornov said. Russian entities have submitted applications worth 58.54 billion rubles out of the 108 billion rubles they hold, he added.

The minister did not specify which Western bondholders are seeking to swap T-bills, but a Finance Ministry official, who spoke on condition of anonymity, identified the applicants as being the local subsidiaries of foreign banks.

Deutsche Bank, which is leading the group of Western investors, and other foreign banks declined to comment on Zadornov's remarks.

The issue is a sensitive one. Foreign investors teamed up after the debt freeze and the group still officially disapproves of the restructuring scheme. Thus, any bank that applies to trade T-bills would be breaking from the ranks.