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. Last Updated: 07/27/2016

Russia Debates Revamping MinFin Debt




Russia may treat billions of dollars of hard currency-denominated MinFin bonds similarly to state ruble debt and restructure the market accordingly, an official at foreign trade bank Vneshekonombank said Friday.


The official said the government was to decide on paying $1.6 billion of principle on the third bond tranche and interest on other tranches, due mid-May, by the end of next month.


"I think a decision will be made ... by the end of April," said Alexei Akinshin, head of the currency and financial operations department of Vneshekonombank.


The bank is the Finance Ministry's payment agent on the bonds.


The question affects one of Russia's biggest investment instruments, MinFin bonds, a $9 billion market and the next major debt bill coming due to Russia's rattling treasury.


Uncertainty has surrounded its repayment but investors have hoped it would be treated like Russian Eurobonds, debt taken since the end of the Soviet Union, which Moscow vowed to pay.


This is in contrast to Soviet-era debt, which the government has accorded a lower priority. MinFins were issued to compensate corporates, whose hard-currency accounts were frozen at Vneshekonombank in 1991 when the Soviet Union collapsed.


But the MinFins, while underwritten by the Finance Ministry, are classed as domestic debt and could be treated like a third category of securities: ruble paper known as GKO treasury bills and OFZ bonds, which has already been restructured after a default.


"This is still generally speaking domestic debt, these Minfins or whatever you like to call them, are closest in form to OFZs," Akinshin said.


"So if you want to talk about equal treatment, then probably you will have to compare to what was offered by the Russian government to the holders of OFZs ... a so-called 'novatsiya' [exchange]," he added.