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Firms scramble to ease rouble pain

Dec 18 2014 16:19

Moscow - Russian firms are scrambling to repay or restructure the terms of foreign currency loans as the rouble's loss of value and an interest rate hike push up the cost of debt servicing.

Many Russian companies increased their share of rouble-denominated debts after the 2008-09 financial crisis yet some big businesses still owe large amounts of dollars and euros.

Russian corporate debt in hard currency exceeds $600bn, of which more than $100bn falls due over the coming year, so some companies will suffer even though the government is unlikely to let a massive default happen.

Exporters, such as world-leading nickel and palladium producer Norilsk Nickel, which sell their goods abroad and receive payment in foreign currency, should have a ready supply of funds for debt servicing.

Worried exporters

But those with foreign debts and revenues in roubles may be hard hit as they borrow in the weaker Russian currency, paying a high rate after the central bank hiked its key rate to 17% to fund repayments in expensive foreign currencies.

"The lending rate for a quality borrower will be 20-21% - a level at which a normal borrower will not take loans, it's too expensive. And to a poor quality borrower banks will not lend," a source at a large Russian bank said.

Analysts say worried exporters have held on to as much of their forex earnings as possible while others are racing to convert roubles into dollars or roubles, deepening the Russian currency's slide.

A perfect storm

 - Meanwhile President Vladimir Putin assured Russians on Thursday that the economy would rebound after the rouble's dramatic slide this year but offered no remedy for a deepening financial crisis.

Putin blamed the economic problems on external factors and said the crisis over Ukraine was caused by the West, which he accused of building a "virtual" Berlin Wall to contain Russia.

Putin even cracked jokes at times, despite pressure to fix an economy that was heading into recession and caught by what his economy minister called a "perfect storm" of low oil prices, Western sanctions over Ukraine and global economic problems.

The rouble has fallen about 45% against the dollar this year and suffered particularly steep falls on Monday and Tuesday, but Putin said its eventual rise was unavoidable and avoided using the word "crisis".

The rouble slipped as he spoke and was about 1.5% weaker on the day. The central bank increased its key lending rate by 6.5 percentage points to 17% on Tuesday and has spent more than $80bn trying to shore up the rouble this year, but to little avail.

russia  |  economy  |  currency


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