Creditors Mull Seizing Russian Assets
"There is no one here to negotiate with."
Some western creditors are believed to be considering seizing Russian banking assets held overseas, in retaliation for the country's 90-day moratorium on some forms of debt. Others may challenge the legality of the moratorium in the international courts.
Western creditors are pressing the Russian government to lift the moratorium on local entities repaying foreign debt obligations. They claim the payment freeze is harming many individual borrowers and the country's overall reputation in international financial markets.
Banking analysts suggest the moratorium affects more than $700m of syndicated loan payments that become due within the 90-day period, as well as an estimated $10bn of forward dollar contracts.
On August 17, the government froze foreign debt repayments as part of the government's anti-crisis measures.
The logic was that Russian banks would have 90 days to sort out their collective liabilities and renegotiate payments where necessary, thereby preventing a systemic collapse of the banking system.
The central bank invited foreign creditors to a meeting in Moscow the following week and asked them to form a committee to discuss the repayments issue. But bankers involved in these talks said they had made little progress.
"As far as negotiating with anyone here is concerned there is no one to negotiate with," said one banker. "There is no government, the central bank is in hiding, and we are waiting to see what if anything happens on the political front."
Max Gutbrod, a partner at Baker & McKenzie, the US law firm which represents several foreign creditors, said some foreign banks had begun to challenge the legality of the central bank's move because there had been no official instruction introducing the moratorium.
"There is no likelihood that things will be any better in three months when the moratorium ends and all that will have happened is that the difficult task of sorting out which are the good banks and which are the bad ones will have been postponed," Mr Gutbrod said.
The central bank has begun taking action to restructure the banking industry and is encouraging a string of mergers, which could produce bigger and better-capitalised banks.
It is pressing parliament to approve legislation to nationalise SBS-Agro, the biggest commercial retail bank, although this move has been opposed by the bank itself.
Margot Jacobs, a banking analyst at United Financial Group, a Moscow-based stockbroker, said some solvent Russian entities were seeking to make repayments in defiance of the moratorium. Such banks did not wish to harm their future credit ratings.
She forecast that the moratorium might collapse anyway.
"I think that most western creditors believe it is not the government's position to get involved in a contract between two commercial entities," she said. "And those Russian entities that can pay want to pay."
The Financial Times, September 1, 1998 |
