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. Last Updated: 07/27/2016

City Gets $295M Loan Restructure

The Moscow city government said Tuesday it has won a debt-restructuring deal on a $295 million loan it owes Credit Suisse First Boston.

CSFB has called in early the loan it issued in August 1998, which should have been due for principle payment in 2002, but at the same time has agreed to restructure the debt into other debt instruments, said the head of Moscow?s finance agency, Mikhail Kalinushkin, Prime-Tass reported.

Kalinushkin said the Moscow government would save around $57 million under the restructuring scheme.

However, he said that because the Finance Ministry?s position on future bond issues is unclear, it could mean the choice of paper under the deal was narrow.

Moscow officials were unavailable to comment further on the choice of instruments on offer.

CSFB refused to comment Tuesday.

Analysts said Tuesday that the deal with CSFB might mean that the bank is angling for a partnership with City Hall for a potential future Eurobond emission.

"CSFB appears to be hoping to get a co-mandate for the next Moscow Eurobond issue," said Stephen Evans, a Russian municipal debt analyst at ING Barings in London.

"Its clear the city government is trying to prepare the federal authorities for its consent for a new Eurobond," he said. "That might not be just to refinance the city?s other debts, but also to fund the mayor?s ambitious construction projects."

Under lobbying from the Moscow and St. Petersburg administrations, the State Duma just last month passed a bill allowing regions with outstanding Eurobonds to issue new ones.

The Moscow government has so far met all of its hefty Eurobond payments despite the August 1998 financial crash.

On secondary markets late last year, it bought back a large chunk of its $500 million Eurobond that was to fall due in May this year.

It redeemed the rest of the Eurobond on time.

Moscow still had outstanding debts of $2.1 billion as of May 31 this year, according to city administration data. It has other principle payments looming on a $500 million Deutsche mark Eurobond that matures April 9 next year and a $400 million Italian lira Eurobond that matures May 18, 2001.

Evans said Moscow?s sound reputation for making good on payments on foreign debts after the crash meant that it would have less problems than other regions in attracting interest in another Eurobond issue.