Russia borrows record amount in the West

Russia borrows record amount in the West

Global Head of Debt Capital Markets at VTB Capital Andrey Solovyev said investors from the United Kingdom, the United States and Russia were the main buyers of dollar-denominated and euro-denominated Russian Eurobonds.

He noted that within the framework of the transaction, an additional placement of the Finance Ministry Eurobonds worth 750 million euro, to mature in 2025 and with yield guidance of 2.375% has taken place. 

Solovyev said that UK investors bought 40% of the issue, investors from Europe - 18%, from Russia - 18%, from the U.S. - 17%, 5% were bought by Swiss investors and 2% - by investors from Asia and other states. In addition, a new issue of sovereign Eurobonds to mature in 16 years, worth $3 billion with yield guidance of 5.1% was also floated, he noted.

The Global Head of Debt Capital Markets at VTB Capital added that it was the Finance Ministry’s biggest Eurobond issue since 2013, TASS reported.

Yesterday, Russia's Finance Ministry floated Eurobonds worth $3 billion and mature in 2035, and an additional Eurobonds placement in euro worth 750 million euro and mature in 2025.

The Russian Finance Ministry had placed seven-year Eurobonds in the amount of 1 billion euros with a yield guidance of 3% in November 2018. British investors bought up the major part of the issue – 55%, 

Professor of the RANEPA faculty of Finance, Money Circulation and Credit, Yuri Yudenkov, speaking to Vestnik Kavkaza, noted that Russia seeks to place as many securities in the West as possible in order to defend against possible radical U.S. sanctions against the Russian financial sector. "The U.S. project is still not canceled, according to which Congress wants to prohibit the purchase of Russia's state debt and block Russian banks' correspondent accounts in American banks, which will disconnect us from the U.S. banking system. Under these conditions, borrowing dollars is a very good move, which negates all these U.S. sanctions efforts in borrowing," he said.

"In the future, I think our Finance Ministry will analyze the situation, and if they see that the scheme works, they will continue to actively borrow money through it. In fact, the issued Eurobonds are the same national debt. The U.S. Congress prohibits American and other companies from participating in the purchase of Russian debt, while the Russian Ministry of Finance comes from another entrance and issues dollar-denominated Eurobonds, the purchase of which is not prohibited under the sanctions," Yuri Yudenkov explained.

"The development of situation will depend on whether the western market is ready to buy our bonds. Russian securities have a rather good yield, but if the crisis breaks out again, they may stop buying. By the way, if there's no doubt about the reliability of our securities, the Ministry of Finance may further increase profitability in order to attract more buyers. If the market situation continues to be favorable, the government will continue to actively issue bonds," the professor of the RANEPA faculty of Finance, Money Circulation and Credit concluded.