Russian authorities launched a large scale refinancing program for companies and banks foreign debts through VEB, and demand has already exceeded the 50 billion dollar limit. Support is mainly for key borrowers in the real sector and vital to regional economies and strategic industries.

Moscow. October 13. INTERFAX.RU - The anti-crisis initiative of the Russian authorities to refinance companies’ and banks’ external borrowings through Vnesheconombank was met with predictable enthusiasm. The bank’s supervisory board only approved the procedure for selecting loan applications on Monday afternoon, and VEB has already received requests for refinancing totaling more than the $50 billion limit.
An alarming debt
Russian borrowers will have to repay a total of $47.5 billion in the fourth quarter, and $115.7 billion in the next. Until recently, the debt level had caused little more than mild concern among rating agencies, while the Central Bank and the Finance Ministry occasionally spoke about the need to introduce monitoring of foreign borrowings by companies and banks with state participation.
Everything changed after the credit crisis finally took hold in Russia. Even issuers with the highest solvency faced the most serious refinancing problems, and for the second tier and below the debt market shut down completely.
In order not to leave systemically important companies and banks alone with Western creditors, the government took an unprecedented step: as part of anti-crisis measures, the Central Bank is allocating $50 billion to Vnesheconombank for refinancing foreign loans.
"In this way we are replacing the money that was borrowed on global markets, and these funds will be reserved in the amount that will be necessary in accordance with the decision on reviewing applications," Arkady Dvorkovich, the president’s aide, explained this initiative at a meeting with Russian President Dmitry Medvedev on Monday.
Real money for the real sector
The main terms for refinancing foreign loans of Russian companies were announced at a meeting of VEB’s supervisory board by its chairman, Prime Minister Vladimir Putin.
"First, the borrowing company must conduct its main activity in the territory of the Russian Federation in the real sector of the economy," V. Putin said. Second, according to him, such companies’ activities must be important either for the region’s economy or for strategic industries. "Third, we should refinance only those loans that were raised for the implementation of investment projects or the acquisition of assets in Russia," the head of government noted.
In addition, according to him, financial assistance "will, as a rule, be provided to those companies that independently attract co-financing and thus share risks with the state."
V. Putin explained that providing the possibility of refinancing foreign loans for companies of strategic importance to certain industries or regions is determined by the inadmissibility of losing the relevant assets, which may entail negative social consequences.
Too much
The volume of applications for funds to refinance the foreign debt of Russian companies and banks has already exceeded the $50 billion allocated for these purposes to Vnesheconombank.
"Due to the relevant ethics of working with our clients, I cannot specifically name the enterprises, companies, and banks that have submitted applications. But the volume of applications already submitted exceeds $50 billion," said VEB Chairman Vladimir Dmitriev.
According to him, corporate borrowers have submitted about 35 applications, and banks about 20.
At the same time, V. Dmitriev noted that despite the excess in the volume of applications, there are no plans yet to increase the amount of funds for refinancing purposes. "We are not talking about an increase right now. It would be wrong to say that the state should take on the full burden of refinancing the obligations of all Russian corporate borrowers," he explained.
The supervisory board also set VEB’s loan limit per borrower within the refinancing program. "We agreed to set a minimum limit per borrower of $100 million and a maximum limit of $2.5 billion," V. Dmitriev said. According to the head of VEB, this is due to the fact that the bank’s financial policy memorandum provides for a limit for one borrower or a group of related borrowers of 25% of capital.
"Based on the announced increase in VEB’s capital by 75 billion rubles - capital currently stands at 180 billion rubles - we arrive at the figure of $2.5 billion," he noted.
The maximum time for VEB to review an application will be 18 days. "The work on reviewing applications and making final decisions is compressed as much as possible in time. 3 days for preliminary analysis, 10 for a comprehensive assessment, during which the financial position of the potential borrower and the original loan documents from foreign banks will be analyzed. And 5 days for making subsequent decisions," V. Dmitriev said.
In his opinion, the deadlines that have been set are "quite realistic for review and final decision-making."
V. Dmitriev said that organizational and staffing measures have been carried out at the bank, which will allow it to concentrate efforts on the key areas at present - refinancing companies, issuing subordinated loans to banks, and supporting the stock market.
Few are lazy
"Only the lazy are not submitting an application to VEB now," a top manager of one of the banks that applied for state refinancing told Interfax.
In a number of major Russian companies, the submission of applications for refinancing to VEB was confirmed.
"We have submitted an application to VEB," Vera Kurochkina, deputy general director for public relations of United Company RUSAL, told Interfax. She declined to comment on the details of the application.
Gazprom Neft also confirmed that it had approached VEB, declining further comment.
The largest Russian borrowers - Gazprom and Rosneft - declined to comment. TNK-BP and the country’s largest coal company, SUEK, are also not commenting on the matter.
Aeroflot and Surgutneftegaz said the companies have no need for refinancing through VEB.
A source close to one of VimpelCom’s shareholders said the operator had submitted an application to VEB. The company is not commenting.
VTB head Andrei Kostin said as early as last Sunday that the bank was discussing with VEB the issue of obtaining a $2.4 billion loan to refinance external debt for this year.
Sberbank has not applied for refinancing from VEB and does not intend to do so, said a source at the country’s largest credit institution. The bank is refinancing with its own funds - for example, a syndicated loan of $1.2 billion was recently raised, the Interfax source recalled.
Bank Soyuz has submitted an application for refinancing external debt, bank deputy chairman Alexei Rukavishnikov told Interfax-AFI. He did not specify the amount of the application. "We, like everyone else, submitted an application," he said.
Vice President for Corporate Communications at Sitronics Irina Lanina said the company expects to secure a VEB loan to refinance its debt to Dresdner Bank.
Euroset (the company’s debt, according to unofficial data, reaches $900 million - IF) did not submit an application for refinancing to VEB, since the company has no external loans, the retailer’s board chairman Yevgeny Chichvarkin told Interfax.
Instead, Euroset appealed to all of Russia’s largest state-owned banks with a request to provide loans, but has not yet received a response, "unfortunately," even from those banks with which the company has a "positive history of cooperation." Nevertheless, as early as last week, Euroset managed to obtain a loan from one of the banks, and E. Chichvarkin is optimistic. "We are the last market participant to run out of cash. People will stop buying phones only just before they stop buying bread. They will stop buying trousers, but not phones. Euroset’s sales have not declined because of the crisis and remain at summer levels," he believes.