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. Last Updated: 07/27/2016

Kasyanov Warns of Differences at Debt Talks




FRANKFURT, Germany -- First Deputy Prime Minister Mikhail Kasyanov warned Friday there were major differences between his country and the London Club of commercial creditors on how to restructure $32 billion of debt.


Arriving at Deutsche Bank AG's headquarters for the second and possibly final day of negotiations between London Club and Russian officials, Kasyanov said he believed there was a chance a deal could be finalized.


"[But] we still have major differences on the level of discount and interest rates and some other issues," he said before the talks started behind closed doors at Deutsche Bank, which chairs the advisory committee of the London Club.


Asked if a deal - considered crucial to pave the way for Russia's return to international capital markets and possibly a deal with the Paris Club of creditor nations - could be announced, he said, "Potentially yes, but not necessarily."


The first deputy prime minister's note of caution, which contrasted with more upbeat statements earlier in the week from Russian officials, pulled some Russian bonds off their highs.


The Soviet-era long-term bonds, known as PRINs and IANs gained more than 30 percent in the past week on hopes of a deal. But by early afternoon London trade, IANs were off 1/8 at 21-5/8 bid after earlier hitting 22, while PRINs were 3/8 up at 19 bid but off the intraday high of 19-1/8.


"Kasyanov's comments will be taken badly. Only local Russian buying in the morning kept prices up. When New York opens, they'll probably move lower," one trader at a U.S. house said.


Analysts also cautioned that, even if both sides agreed the broad parameters of a deal, legal and other details could delay a final agreement by months.


"There is, in our view, a higher probability of disappointment than of excitement about the outcome of the current round of negotiations," CS First Boston said in a research note.