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08/13/1998 15:46:48 Moody's analyst says Russia financing gap a worry

By Apu Sikri

NEW YORK, Aug 13 (Reuters) - Russia's increasing difficulty

in rolling over short-term Treasury bills in the absence of

investor confidence was a major catalyst in the decision by

Moody's Investors Service to downgrade the republic's credit

rating, a senior analyst said.

"If the GKOs are not rolled over, there is a big financing

gap," Jonathan Schiffer, senior analyst at Moody's, told Reuters

in a telephone interview.

"If you plot it out and assume current trends, the gap is

larger next January, larger next May, and it goes on," he

added.

"If you look at the best case scenario from their point of

view, there is still a big gap," he said. "I don't want to use

the word default, but there is a big gap," Schiffer said.

On Thursday, Moody's downgraded Russia's country ceiling for

foreign currency bonds and notes to B2 from B1.

"It is not clear where the money will come from. We've been

watching investor reaction to this. When you put the two

together, the situation has worsened considerably since our last

move which was in May. This is simply not a short-term problem,"

the analyst added.

The chances of a devaluation of the rouble are now "greater

than they were three months ago," Schiffer said.

He added that if a devaluation were to occur, it would make

it more expensive for the republic to service its debt and have

wide ramifications for the banking system.

Meanwhile, the U.S.'s other major credit rating agency,

Standard and Poor's, told Reuters it was "concerned" about the

Russian situation and that it was reviewing the country's

current single-B-plus foreign currency debt rating.

S&P has a stable outlook for Russia's debt ratings.

(( -- N.A. Treasury Desk; 212 859-1562 ))

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