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Russia plans to execute a $4 billion eurobond swap as early as September to avoid repaying principle on foreign debt. Russian Finance Minister stated Monday that the exchange will not happen before then.
“We will need some time now to prepare for the exchange. I think we won’t be ready before September,” Siluanov said in an interview with Reuters.
The goal of Western sanctions on Russia has been to prevent Moscow’s access to foreign capital in the international capital markets to refinance corporate and sovereign debt or raise equity. The sanctions were imposed due to the annexation of Crimea and Moscow’s support for the pro-Russian separatists in the conflict in Donbass. The action has crippled Russian firms in many ways and opened holes in the federal budget, causing deficits. Repaying principle at maturity for bond holders is not a sound tactic in this environment, hence the bond swap.
The refinance for the Kremlin would most likely be bonds maturing in 2018 and 2030, reports Reuters. Moscow raised $3 billion in June from international investors via a fixed-income offering. Demand was high and the issue oversubscribed; the same is expected for this next tranche.