More banks steer clear of Russia`s bond sale

Thursday, March 24, 2016 - 16:26 (EET) Section: Latest news

The Russian government is struggling to find major global banks to help it sell $3 billion worth of sovereign bonds, putting into question Moscow`s return to capital markets after a near three-year absence, The Wall Street Journal reported.
Many European banks have ruled themselves out of participating in a bond sale, unwilling to upset U.S. and European authorities, who have imposed sanctions on a range of Russian companies and individuals, according to The Wall Street Journal.
The U.S. government has already warned off some top U.S. banks, it is said.
That leaves Russia mainly reliant on local and Chinese banks to get the deal done. But these banks may not have the international reach to sell Moscow`s first foreign deal since sanctions were imposed following Russia`s annexation of Crimea in 2014. Russian officials have said that European banks are crucial for the sale, according to the report.
The sanctions don`t explicitly prohibit banks from handling bond sales for the Russian government or investors from buying these securities. But the U.S. and the EU are concerned that Moscow could funnel money raised to sanctioned companies, and they have let banks know that, people familiar with the matter said, according to The Wall Street Journal.
”Nobody wants to do something that could be seen to be outside the spirit of the sanctions,” said Paul McNamara, a fund manager at GAM Holding AG.
European banks are also concerned about angering the U.S., which in recent years has levied billions of dollars of fines against European lenders, including BNP Paribas SA and HSBC Holdings PLC, for breaching sanctions.
At this, Svetlana Nikitina, an adviser to Russian Finance Minister Anton Siluanov, said earlier this month that around half of the 28 banks it asked to pitch for the deal have responded to the offer.
The banks in talks with Russia are asking that the bond not be denominated in dollars, one Moscow-based banker close to the deal said. That could crimp the total amount of money Moscow could raise, investors say, according to The Wall Street Journal.
If the bond is denominated in dollars then its settlement will have to go through the U.S., which could present problems for banks working on the deal, this person said.
A final decision on which banks will be hired is expected by the end of this week or as early as next week, according to a Russian government official.
As well as Russian banks, Chinese banks will be among the main organizers of the deal, but Moscow would still like Europeans to take part in the deal, the government official and the Moscow-based banker said, according to the report.