The RF Ministry of Finance shows no anxiety whatsoever regarding the current volume of debt that Russia’s state-owned entities have accumulated. However, future foreign loans will be subject to tougher scrutiny.
“We do not see any grounds for worry. Payables are quite modest and cause no apprehension,” Deputy Finance Minister Dmitry Pankin told Reuters.
In October 2009, the Central Bank of Russia suggested corporate foreign borrowing be checked, while Russia’s Audit Chamber came up with specifics of government oversight over international loans taken out by corporations and banks partly or fully owned by the state. The idea resonated well with RF Finance Minister Alexei Kudrin who said government-run firms “tend to underrate currency risks.”
Mr. Pankin said earlier this year that the financial regulator would embark on “soft monitoring”, finding out state-owned companies’ plans for borrowing overseas.
“At the same time we are drafting a new provision that will compel government officials on company boards to get ministerial approval of prospective loans they are going to vote for,” he added.
According to the Central Bank of Russia, as of April 1, 2010 this country’s corporate foreign debt was about $430bn.
International debt markets were a major source of funding for Russian companies and banks before the financial crisis. Then a long slack followed, caused by the global recession, when only a select few of Russia’s borrowers could access the shriveled market. Those included Gazprom, Lukoil, state banks and some private ones.
This year, Eurobonds have been in demand; investors have bought as much as $13.15bn in Russia’s risks since January 1.
Gazprom’s net debt swelled 35% in 2009 to $45.7bn. The gas monopoly has aired plans to cut it this year by “a minimum $1bn,” Gazprom CFO Andrei Kruglov said.
Government-run Rosneft is also highly leveraged. It accumulated most of its debt to buy out the YOKOS assets; the rest came from 2009’s Chinese ‘cash-for-oil’ loan. The oil corporation is reported to be gradually repaying its debt and have no plans for further borrowing. As of late 2009 its payables totaled $18.49bn; they have decreased by $2.79bn so far.
Russia’s national rail operator, Russian Railways, would borrow heavily before the financial crisis. This year, the corporation once again entered the global debt market and has issued $1.5bn worth of Eurobonds.
State-run agriculture-focused bank Rosselkhozbank, has borrowed $1bn since the beginning of this year, while another government asset, VTB Bank, has raised $1.25bn overseas.
“It is quite reasonable for the Ministry of Finance to be willing to take part in discussions of foreign loans; state assets’ foreign debt parameters are critical in drafting a national budget,” one of Russian Railways’ board members said. He added that corporate loans were not a mandatory issue for today’s board meeting agendas at state-owned companies. If it is decreed mandatory, he said, approvals will have to be collected from all government regulators.
The new management of Russia’s largest energy-generating company, state-owned RusHydro, has also posted plans to borrow in overseas markets in order to buy assets and finance its investment program. The firm is said to have very low leverage.
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