Russian Officials To Meet Bankers, Discuss Restructuring Defaulted Bonds - : LUSENET : TimeBomb 2000 (Y2000) : One Thread

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Russia set for debt talks

Government of Russia to meet bankers, discuss restructuring defaulted bonds

February 10, 2000: 7:51 a.m. ET

FRANKFURT (Reuters) - Russian officials and the London Club of commercial creditors will meet later Thursday to try to restructure $32 billion of debt and help pave the way for Russia's return to international capital markets.

Talks are due to begin at Deutsche Bank's headquarters in Frankfurt on Thursday afternoon and last until Friday. Deutsche Bank is chair of the London Club's Bank Advisory Committee.

Officials close to the talks told Reuters they did not expect any major developments until Friday, when Russian First Deputy Prime Minister Mikhail Kasyanov is expected to arrive.

Russia is said to view the talks as part of broader attempts to reduce its overall overseas debt. A breakthrough with the London Club could improve chances for an agreement on Russia's $42 billion debt to the Paris Club of creditor nations.

The new talks are the latest in a series of tortuous attempts to resolve the debt crisis. Negotiations to restructure the $32 billion owed to commercial banks stalled in December after Russia said it wanted 40 percent debt forgiveness. The 10 banks in the London Club reportedly held out only 35 percent.

But there are hopes an agreement could be found.

Kasyanov, who led several rounds of debt talks last year as finance minister, has since been promoted up the government ranks. Vladimir Putin's likely election as president on March 26 is also said to augur well for commercial relations.

Despite optimism about the talks -- Andrei Kostin, head of Russia's state debt agency Vneshekonombank said Tuesday there was every reason to believe an agreement would be reached by the end of the week -- there are several hurdles to overcome. Obstacles remain

Creditors have insisted any default on the new eurobonds automatically causes a default on Russia's $15 billion of existing eurobonds, under a process called acceleration.

Russia says it wants to keep separate its Soviet-era and Russian Federation bonds but has said cross-default clauses could be written into future Russian Eurobonds.

There are also stiff time pressures, both from Russia's presidential elections and talks with the Paris Club. Analysts believe the London Club talks would get bogged down if not concluded before official Paris Club negotiations began --- expected in the second half of this year.

If an agreement is found, the debt, already restructured once, is likely to be converted into more senior eurobonds.

Widely leaked details by Russia in December suggested the new bond would have a 30-year duration, with a seven-year grace period, and paying a rate of interest rising from around 2 percent in year one to 7 percent in years eight to 30.

However, it was not clear how more than $1 billion of skipped interest payments would be treated. Restructured Soviet-era bonds have gained recently on hopes for a deal with the London Club.

-- snooze button (, February 10, 2000

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