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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

said.

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,

moscow.newsroomreuters.com))

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