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. Last Updated: 07/27/2016

State Fails To Issue Rail Paper

The Finance Ministry failed Wednesday to meet its deadline for issuing new paper to cover bonds issued by the now-insolvent developer for a planned high-speed rail link between Moscow and St. Petersburg after holders of the original bonds objected to the state's restructuring proposals.

The Moscow Club of Creditors is stuck in talks with the Finance Ministry and the developer, High-Speed Railway, or VSM, over the terms for restructuring 355 million rubles ($14.7 million) of overdue bonds issued under the fourth tranche of VSM's bond program and 582 million rubles of the fifth and sixth tranches that mature in November 1999 and April 2000, respectively.

VSM officials blamed the Finance Ministry for the delays.

"Everything is stuck in [the Finance Ministry]. Two months of the negotiations still have zero results," said Andrei Nikandrov, deputy financial director at VSM. "The ministry insists that the old VSM bonds be replaced with new VSM bonds while the Moscow Club of Creditors ... insists that the bonds be replaced with new GKO-OFZ [treasury bill] bonds."

VSM, created in 1991 to manage the $5 billion project, issued a series of bonds, all backed by state guarantees, to finance the project.

Earlier this year, the Finance Ministry offered to restructure the fourth tranche of the bonds, which were due Sept. 18, 1998, for three tranches of new paper with two-, three- and four-year maturity. The bonds were to be issued Wednesday and would have a sliding coupon of 30 percent in the first year and 5 percentage points less each subsequent year, according to brokers association NAUFOR, representing the Moscow Club of domestic creditors.

Nikandrov said that the next round of talks is expected after the May holidays but no new proposals have been put forward.