Investment in Russia and Eastern Europe Message Board

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Strategies & Market Trends : Investment in Russia and Eastern Europe

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To: djane who wrote (524)	8/26/1998 11:59:00 AM
From: P.T.Burnem	of 1301

The difference between debt restructuring and highway robbery is that the former typically involves negotiations with the victim(s): Investors could also choose to restructure their old rouble debt into dollar-denominated debt. But in that case they would only be able to redeem 20 percent of the nominal value of the old rouble debt for the dollar bonds, which would give a five-percent coupon and would mature in 2006. Let's see: one gets 20c on the dollar with a 5% coupon... Since Russian Eurobonds yield six times that much (~30%), one's payoff in real terms amounts to 20c/6 = 3.5c on the dollar . If that were not bad enough, WSJ reports that the Russian government: ... reserves the right to limit trading in the new securities. As I have predicted, foreign investors got fleeced in the process: The conversion terms don't apply to the central bank, which holds about $10 billion of the bonds in question, or to Russian individuals, who hold an estimated $300 million of the bonds. The fate of those securities is still unclear. Don't let this happen to you! PTB

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