Page 49 - RusRPTJuly18

6.2 Debt
Russia - Gross external debt 2011 2012 2013 2014 2015 2016 3Q 2017
Budget: gross debt (LC bn)
5,343 6,520 7,548 10,299 10,952 11,110 11,854
Budget: gross debt (% GDP)
10.9 11.8 13.1 15.6 15.9 12.9 12.6
source: Rosstat
Russian corporate bond issuance reached a record RUB6.7 trillion ($104bn) in the first quarter of 2018, reports a new study by RANEPA and the Gaidar Institute. From January-March, companies issued 132bn rubles ($2bn) worth of bonds, 34% more than in the same period last year.
In 2017, Russian companies issued $43.3bn worth of bonds, a record
since 2013 when bond issuance stood at $74.3bn. With 2018’s the first quarter data in, this upward trend continues. According to Yakov Yakovlev, an investment management analyst, bonds have become attractive debt instruments due to Russia’s low rates. Against the background of a decrease in the yield of OFZ (federal loan bonds issued by the Russian government), spreads for corporate borrowers have decreased.
This uptick in bond issuance owes largely to companies in the oil and gas sector . Over the last five quarters, Rosneft accounted for one third of the total volume of new bonds. Another 10% can be attributed to Gazprom.
This debt is primarily ruble-denominated, and the volume of FX debt has not changed over the past few quarters. Furthermore, despite the surge in bond issuance, the bulk of the company's domestic debt (32.7 trillion rubles, $510bn) remains bank loans. Central Bank data show that banks increased lending to companies in the first quarter of 2018 by 1.8%.
Russian companies are taking advantage of a favourable macroeconomic environment —interest rates have decreased nearly 10 percentage points since the peak of the economic crisis in 2014—to expand their financing opportunities. According to Fitch analyst Alexander Danilov, bond issuance is ultimately still bank financing, as the bonds are primarily bought by banks.
Unlike loans, however, these bonds are available to a wide range of banks. While second and third tier banks, as a rule, cannot lend to companies such as Rosneft or Gazprom, bonds enable Russia’s largest companies to receive financing from an unlimited scope of untapped sources. Bonds in Russia also help oil and gas firms raise capital despite financing limitations created by sanctions.
RUSSIA Country Report July 2018 www.intellinews.com