Training on modelling fundamentals December 17–18

Debt of Russian regions to remain expensive

Prospects for refinancing public debt of Russian regions

  • Debt refinancing is the key trend in the Russian financial market. Although the key rate of the Central Bank of the Russian Federation is still higher than the pre-crisis level, long-term loan rates are already lower for the majority of borrowers. For instance, regional bonds yields at placement declined from 15%-16% in 2014-2015 to the weighted average of 8% as at end-2017.
  • However, up to 24% of the commercial debt of the regions will stay expensive and will not be refinanced. These are fixed-coupon bonds providing for no early repayment at the offering price. Current pricing exceeds offering prices of almost 48% of the regional bonds in the market by 3-30 bps (the share of comparable bonds in the corporate sector is 2.3%). Primarily, these are bonds issued during the crisis period of 2014-2015.
  • In view of unavailable refinancing for expensive bond issues of previous years, losses of regional budgets would reach as much as RUB 30 bln in 2018-2023. Of that amount RUB 9.1 bln…

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