Fitch IBCA says Moscow's financial position "precarious"
By Bridge News
London--June 17--The City of Moscow's financial position is showing signs of
deterioration and will remain "precarious" for the rest of this year,
credit-rating agency Fitch IBCA said today.
Although the Russian capital has avoided defaulting on a syndicated loan
payment due today by restructuring, it still faces a shortfall in its
debt-servicing funds for 1999.
Moscow's annual budget has shrunk from about $10 billion to a little over $3
billion since the devaluation of the ruble in August from 6 per dollar to around
24, Sergey Pakhomov, acting chairman of the city's municipal debt committee,
said at a conference here Wednesday.
Fitch IBCA estimates that Moscow has funds of $443 million earmarked for
debt servicing in 1999, insufficient to meet debt commitments of at least $471
million. This includes $178 million for external debt and 2.9 billion rubles
($123 million) for domestic debt, plus eurobond coupons of around $70 million
and domestic and foreign currency loan redemptions of more than $100 million
already made.
Today Moscow made an initial $31.2 million payment under the restructuring
plan agreed with creditors for the remaining $100 million of a $200 million
syndicated loan arranged by Deutsche Bank AG, Westdeutsche Landesbank and
Societe Generale in 1997. The remainder will be paid in four equal installments
by March 31, 2000, earlier than the original due date of June 18.
The loan was rescheduled because the city was unable to meet a demand for
early repayment in full, in contrast with its position in 1998, when it was able
to repay $100 million on the loan when requested, Fitch IBCA said.
Creditors were eager to receive payment before a eurobond principal payment
of $500 million came due on May 31, 2000, rather than afterward as originally
scheduled.
Because Moscow prioritizes payment of eurobond coupons over loan
obligations, it may consider restructuring some commercial loans, Fitch IBCA
said.
"This process will be a key part of either its success or failure, as will
the city's ability not just to meet, but to exceed its budget and extra
budgetary fund targets during the rest of the year," the agency said.
Revenue collections have been promising so far this year, with the first
quarter 14 percent over target. The 1999 budget commits the city to using the
extra revenue for debt repayment.
Fitch IBCA currently assigns the City of Moscow long- and short-term foreign
currency ratings of triple-C and single-C, respectively, unconstrained. These
ratings apply to its senior, unsecured foreign-currency debt. End
By Bridge News
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