Kremlin mentions early repayment of US$3bn Eurobond

Kremlin mentions early repayment of US$3bn Eurobond



15 січня 2015 года
ICU

Yesterday, Russian top officials considered exercising the early repayment option of the US$3bn two-year Eurobond. Although the famous bond -in that it was issued under the administration of kleptocratic ex-president Yanukovych just a month before he fled the country - matures in late December 2015, it has also a rarely exercised covenant of 60% public debt to GDP and is quite vaguely written, particularly in that it does not stipulate at which currency it is should be calculated. It is common knowledge to debt finance people that within the crisis-prone EM world that the local currency based debt/GDP ratio tends to exceed the US dollar based one. If accounted for in hryvnia, Ukraine's 2014 year-end debt/GDP ratio will be 65% versus 50% if accounted for in US dollars. The prospectus of this particular Eurobond does not address this well-known issue, possibly on purpose by the Kremlin to spawn the speculation of a Ukrainian default. Indeed, the Russian government during that last year justified issuing this innovative Eurobond quite possibly to have a case to create negative market sentiment. Although Russian officials have not yet officially demanded early repayment, they raised public awareness of such a possibility over the past few days. The next time Russian officials meet their Western counterparts to negotiate a Ukrainian peace settlement, this Eurobond issue obviously will be discussed. The Kremlin is positioning itself while preparing for some other bold move like pressing the West to lift sanctions or force Ukraine into insolvency.

Источник: ICU

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