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. Last Updated: 07/27/2016

Alfa Bank Plans to Seek Cash Abroad




Seeing improving attitudes toward Russia after the debt deal with the London Club last week, Alfa Bank has mapped out plans to tap international markets, raising a syndicated loan before the end of this year and placing Eurobonds in the first half of 2001.


"Proceeds will be used to develop classical banking business, primarily lending," Alex Knaster, the bank's chief executive officer, said Tuesday.


Alfa Bank hopes to capitalize on a sound credit history built in times of crisis and pay no more than 11 percent interest to international lenders, borrowing for a period of up to one year through syndicated loans and for three to five years through Eurobonds.


"Investors differentiate between our credit history and the credit history of the federal government," said Knaster, adding Alfa Bank hopes to obtain funds at lower rates than the government.


Russia's Eurobonds currently yield 17 percent, while outstanding Eurobonds of Alfa Bank have a yield of 21.9 percent and are priced at 94 percent to 96 percent of face value.


This year Alfa Bank has to pay out $193 million in maturing Eurobonds, annual coupon payment included, and has to service its debt originally issued in the form of commercial paper restructured last year.


Alfa Bank repaid about 40 percent of the debt principal immediately after restructuring was completed and continues to service it with quarterly payments. The bank's officials said the bank had liquidity problems at the time when the payment came due, but default on the debt had been unlikely from the start.


Knaster dismissed allegations that the bank was used by its holding company, Alfa Group, as a vehicle to finance expansion projects in non-banking areas of business.


Alfa Bank has a loan portfolio of $400 million, but loans to companies in Alfa Group account for less than 10 percent of this amount.


Corporate risks aside, the bank's future borrowing plans will hinge on general developments in the sovereign debt market.


"We will have to see how Russia's talks with the Paris Club will go," said Andrei Naumenko, an analyst with Thomson BankWatch rating agency.


Naumenko said Alfa Bank's plans to tap international capital markets paying interest of 11 percent were based on an "optimistic scenario."


Alfa Bank is not the only bank that can afford to tap international capital markets.


"We were approached by foreign bankers, but declined their offer because we cannot afford to pay such interest rates," said Gleb Kostin, deputy chairman of Moscow Business World Bank.


Kostin said loans to triple A customers - exporters - could be priced at 15 percent, while the lowest rate Russian banks could pay raising international loans should range between 13 percent and 15 percent, so margins were close to nil.


Also, estimating costs on the basis of an announced interest rate could be misleading, because the real cost of borrowing could be hidden in fees charged by the underwriter, Kostin said.


Analysts are skeptical about Alfa Bank's prospects of being assessed independently of Alfa Group, which unites assets in various industries, from cement to oil production.


Alfa Bank's Knaster said the bank's shareholders were different from the group's shareholders, so it would be illogical to seek connections to industrial companies in the group.


However, bank officials admitted some people viewed the bank in this way. The said the bank's reputation was damaged because of its 25 percent stake in Tyumen Oil Co.


The oil major's stand-off with BP Amoco over the Chernogorneft production unit was only recently settled.