Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Russia Reaches Deal To Restructure Debt




The government agreed Monday to restructure $1.3 billion of Soviet-era debt.


The long-awaited deal addresses only a small portion of the country's huge $140 billion debt problem, but appears to shortchange investors.


The government defaulted on the loans, MinFin three series bonds, in May. Ever since the crash last August, Russia has been trying to reschedule debt run-up in the Soviet era in order to meet payment schedules for post-1991 debt.


At the time of the MinFin default, the government said it would offer a restructuring deal within six months.


Investors who hold MinFin bonds say the deal leaves them with only 20 percent of the original value of their loans. But many investors may not have expected much more, as the tangled debt talks have dragged on.


Monday's offer swaps some hard currency-denominated debt for ruble-denominated bonds, Interfax reported.


That exposes creditors to the risk of the unstable ruble taking another plunge in value, as it did in August 1998.


The terms are typical of deals being offered by the Russian government as it restructures its massive debts: a total of about $95 billion left over from the Soviet era and about $45 billion accrued since 1991.


If Russia were to meet all debt obligations under current agreements, annual payments would be about $15 billion a year, or about 60 percent of this year's national budget.


The MinFin series of bonds was offered to investors after an initial default after the collapse of the Soviet Union.


A portion of the MinFin3 debt will be restructured as hard-currency bonds maturing in eight years with a 3 percent annual yield.


The ruble debt will mature in four years with a 15 percent annual yield for one year and 10 percent for remaining years, a return below expected annual inflation.


Meanwhile, Communist Party chief Gennady Zyuganov, who heads the largest opposition bloc in Russia's parliament, said Russia should refrain from taking out any new loans. He said it should devise a new debt-free economic policy but did not elaborate on how.