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To: lorne who wrote (30380)	3/21/1999 2:03:00 PM
From: goldsnow	Respond to of 116791

Banks divided on debt restructuring CSFB insists its plan is alive, but Russians aren't budging By Margaret Coker, CBS MarketWatch Last Update: 11:58 AM ET Mar 19, 1999 RTS World Markets MOSCOW (CBS.MW) – The Russian government is giving the cold shoulder to a renegade proposal put forward by Credit Suisse First Boston that promises investors a chance to recoup more of the money they lost when Russia defaulted on its Treasury bills last summer. Breaking ranks with the other foreign investment banks negotiating with Russia over debt restructuring plans, CSFB announced this week the creation of the Nikitsky Fund, which allow holders of the defaulted treasury bills, or GKOs, to swap their nearly worthless paper for concrete investment opportunities in Russia. Proceeds from the fund could easily be repatriated out of the country, a key advantage over the government's plan. CSFB has promised its proprietary position in GKOs plus a $15 million unsecured loan for initial expenses to kick-off the Nikitsky Fund, a vehicle it describes as a seven-year recovery fund that would target infrastructure investments in Russia. On Aug. 18, the government froze its $40 billion domestic debt market, and gave up support for the Russian currency, the ruble. The bonds, held in most part by international banks and mutual funds, have devalued to an estimated $12 billion. 5 cents on dollar Investors have been offered a government plan to swap the old debt paper for new longer-dated issues and some cash, with limited opportunities to invest and repatriate proceeds, which CSFB and other banks have valued as a return worth as little as 5 cents per dollar of original investment. This week, CSFB reported a loss of 221 million Swiss francs ($154 million dollars) in 1998, and took a $124 billion charge in provisions due to Russia's financial crisis. CSFB's exposure to Russia totals $2.4 billion, of which loans amount to $1.4 billion. The bank was one of the five largest non-Russian investors in the Treasury market at the time of default. Its GKO portfolio was said to total 40 percent of the outstanding amount of GKOs held by foreigners, a fact that makes debt restructuring a major issue for the investment bank. Analysts believe that if the bank attracted a critical mass of the GKOs held by foreigners, it could haggle with the government for better redemption terms in what has been the biggest sovereign default in recent history. But the outlook for success is mixed. CSFB broke ranks with the group of six banks selected to negotiate with the Russians. The group had failed to win significant concessions from the Finance Ministry in months of talks on restructuring the bond market. Deutsche Bank, Chase Manhattan (CMB) and Credit Lyonnais have already expressed their willingness to go along with the terms of the government proposal. April 15 deadline The government says two-thirds of all the bonds have already been swapped under its scheme, including one-third of all foreign holdings, despite the fact that all the details on the swap won't be released until Monday. The deadline for converting the old bills is April 15 -- a date that has changed many times before, giving at least some hope of success for CSFB's plan, banking sources say. CSFB's chief executive, Allen Wheat, had insisted the government was ready to discuss the new proposal if there were major support among foreign investors, but he did not say who was ready to negotiate, Reuters reported on Tuesday. Since then, a marching line of Russian officials have all said they aren't even considering the CSFB offer. A debt swap meeting chaired by Prime Minister Yevgeny Primakov this week did not even discuss the proposal, a Finance Ministry official said. Finance Minster Mikhail Zadornov went further. "We did not hold and do not intend to hold any talks with the Nikitsky Fund or CSFB about changing the terms of exchange," he told reporters. "The bank is misleading its clients. They are creating completely unrealistic hopes and expectations and our fear is that these clients by following these expectations may lose what they should get under our exchange system." In the face of such a cold response, CSFB isn't talking -- or backing down. A CSFB spokesperson contacted in London on Friday would not disclose further details either about the future of the proposal or further strategy with the government. "We are not making any more comments on the record at this time," she said, but added the proposal was still on the table. Margaret Coker is Moscow correspondent for CBS MarketWatch. cbs.marketwatch.com