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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: Gersh Avery who wrote (33242)	11/7/1998 4:33:00 PM
From: flickerful	Respond to of 94695

Russia secures outline deal on debt restructuring...ft 7 nov 98 By John Thornhill in Moscow and Jeremy Grant in London Russia's hard-pressed government achieved three breakthroughs in its troubled international financial affairs yesterday. It reached an outline debt restructuring deal with foreign creditors, won an $800m credit from Japan and secured $600m worth of food aid from the US. After weeks of tense negotiations, Moscow persuaded foreign creditors to accept rouble-denominated securities as part of a restructuring plan of its frozen $40bn treasury bill (GKO) market. In return, the finance ministry dropped its insistence on including Russian commercial banks' outstanding forward dollar contracts in the plan. Foreign banks had bought these contracts as a way of protecting their GKOs against a rouble devaluation. The agreement means Russia has moved a step closer to rebuilding its shattered credibility in global financial markets. Moscow sparked a fresh round of global financial turmoil in August when it announced a debt moratorium, leaving some of the world's biggest banks and hedge funds nursing huge losses linked to their exposures to the GKO market. Mikhail Kasyanov, deputy finance minister, said foreign banks had been forced to swallow big losses on their GKO holdings but had still kept faith with Russia by accepting rouble-denominated instruments. Under a proposal to be discussed at further talks next week, foreign banks could swap their GKOs for a menu of options including taking stakes in companies to be privatised. "It's probably not so bad considering that the [previous] deal was worse. At least you remain invested in Russia," said one banker. As the agreement does not address what happens to the forward contracts, foreign creditors will now be able to force Russian banks to honour an estimated $6bn in such contracts when the government-imposed moratorium on repayments expires on November 18. That could involve lawsuits, which in turn could threaten some of the country's biggest banks with bankruptcy. Foreign bankers praised the constructive approach to the talks adopted by Mr Kasyanov, saying it was in marked contrast to the brutal manner of Soviet-era negotiations. "The whole spirit of the talks has been quite good and very civil," said one banker. Japan yesterday promised to release an $800m credit agreed in July as part of a $22.6bn international loan package. But the International Monetary Fund, which was to provide the bulk of the promised funds, is continuing to withhold the next $4.3bn tranche of its loan until the Russian government draws up a comprehensive economic programme. Russia also secured a $600m credit from the US which can be used to buy food to help avert starvation this winter. ft.com