Credit Crunch Looms for Russian Companies

Russian companies face the prospect of a credit crunch unless sanctions imposed by the west are relaxed and access to international capital markets is regained, according to Moody’s.

The credit ratings agency (CRA) reports that debt issuance by Russian companies in global capital markets has dried up in response to the European Union (EU) and US imposing stronger retaliatory measures after Malaysia Airlines flight MH 17 was shot down over eastern Ukraine on 17 July. Without access, Russian companies will be unable to refinance maturing debts with international investors.

Analysts cited by the
Financial Times
predicted that the crunch would hit in 2016 and Russia’s metals and mining, real estate and construction sectors could suffer most.

“Most companies have sufficient liquidity to enable them to meet their 2015 debt maturities,” said David Staples, Moody’s managing director with responsibility for emerging market companies. “But when you move into 2016 and 2017, the numbers start to become a concern if companies don’t have access to the international debt capital markets,”

According to the Central Bank of Russia, the country’s banks and corporates have to repay a total of US$134bn in external debt between now and the end of 2015. In December alone, a total US$32bn comes due for redemption, partly reflecting the need for state oil company Rosneft to repay foreign loans it took out to finance its acquisition of TNK-BP in March 2013.

Analysts warn this spike in redemptions will further fuel capital outflows, which already jumped to US$74bn over the first half of 2014.

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