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. Last Updated: 07/27/2016

MinFin Revamp Unveiled




The Finance Ministry announced Friday the terms for restructuring of Series 3 OVGZs, or MinFin 3 bonds, originally issued in 1991 to depositors in the Soviet Vneshekonombank, as a means of repaying them on defaulted accounts.


The bonds, on which Russia defaulted May 14 of this year, will be converted into 1,322,000 new bonds with a face value of $1,000 each to be redeemed Nov. 14, 2007, the ministry said.


Interest payments will be set at 3 percent per year, to be paid semiannually from May 14, 2000.


After the collapse of the Soviet Union, the Finance Ministry restructured Vneshekonombank deposits into government MinFin bonds, to be repaid in five tranches beginning in 1994.


The government successfully paid off the first two tranches, redeemed in 1994 and 1996 respectively, but was only able to make the coupon payments on the accumulated interest on the total remaining debt, defaulting on the third tranche that came due this spring.


At a total of $1.3 billion, the face value of the new restructured bonds is equal to the original value of the old. However, debt analysts say the bonds' current market value means that bond holders will only get 20 cents on the dollar if they decide to sell on the secondary debt market.


"Creditors were expecting to be paid in 1999, but now they are holding a bond maturing in 2007," said Sergei Prudnik, a fixed-income analyst with Troika Dialog. "It's unpleasant, but it is the best Russia can offer right now because it has a dense debt schedule for the next year."