08/19/1998 15:34:03 FOCUS-Russia delays key debt overhaul deal
(Recasts, adds parliamentarian quotes)
By Anna Smirnova
MOSCOW, Aug 19 (Reuters) - Russia delayed word of the terms
of a key overhaul of its once-booming short-term debt market on
Wednesday, allowing Western investors a sigh of relief.
They said news that Deputy Prime Minister Boris Fyodorov was
to give the terms of the deal on Monday rather than late
Wednesday meant Russia was thinking carefully about the debt
deal, which could affect its access to finance for years ahead.
The delay came as Fyodorov planned more talks with Western
investors, who have bankrolled Russia since the collapse of
Communism, and amid speculation about a government split about
the deal's terms.
"On Monday, it (the scheme) will be totally completed, this
I promise," said Fyodorov, also Russia's tax collection supremo.
The debt overhaul involves swapping short-term government
debt in the form of rouble-denominated GKO t-bills and OFZ bonds
into longer-maturity paper, which will be easier for the
ex-Soviet giant to finance from its depleted coffers.
The debt deal was part of a package of monetary measures
announced on Monday, which included a de facto devaluation of
the rouble, aimed at ending a financial crisis.
"This is no empty declaration. If there is no announcement,
I will no longer be here (in government)," he told reporters.
Talks with foreign banks were continuing and "no mistake or
uncertainty" should be allowed, he said.
Western banks have already howled with protest after a
release of preliminary details of the debt swap scheme on
Tuesday showed it would discriminate against foreign investors.
Analysts said a discriminatory scheme would effectively cut
Russia off from Western financing for years to come.
The government is to discuss the restructuring on Thursday
and seek approval by the Duma, the lower chamber of parliament,
on Tuesday, First Deputy Finance Minister Vladimir Petrov said.
A senior parliamentarian said the government was split on
the debt deal, with one camp backing a more consfiscatory
arrangement of a 10 percent pay off now, with the rest swapped
into debt maturing over three or four years.
Another group wanted a 40 to 60 percent payment with new
paper of one to 1 to 1/2 years, the parliamentarian added.
Fyodorov said the government intended to repay maturing
short-term debt with new paper at face value. Debt maturing
today was included in the plan.
He said on Tuesday that foreign advice was needed for the
deal and had invited J.P. Morgan and Deutsche Bank for talks.
Talks continued with both these banks and the government
would not rush the debt conversion, he said on Wednesday.
"We cannot manage without specialists who have done this
(debt restructuring) previously," he said.
He gave no more details as he said it was important not to
rush the announcement. He said the "time-out" of five days was
needed so there would be no "mistakes or any uncertainties".
"My first reaction is that this is a positive and the market
took it positively too. If they had made an announcement today,
it would have been a situation that would have been
unfavourable," said Charles Blitzer, chief economist for
emerging markets at Donaldson, Lufkin & Jenrette.
Credit Suisse First Boston criticised the preliminary terms,
saying it seemed the swap would discriminate against foreigners.
Under the plans being considered, foreign holders of GKOs
stood to receive only about a third of what equivalent domestic
holders receive, CSFB said.
"This would permanently damage private financing of Russian
reform and significantly destabilise other emerging markets," it
Vladimir Konovalov, CSFB's fixed income strategist in
Moscow, also said postponement of the announcement was good.
"My understanding is that we will now have a chance to
discuss the restructuring with the Russian government over the
next few days," he told Reuters television.
"There may be meetings with the prime minister tomorrow
afternoon at some point," he added.
((Moscow Newsroom +7095 941-8520,