Debts VEB offered to exchange the Eurobonds of the Russian Federation

Moscow. November 24. The Ministry of Finance to prevent the default of Vnesheconombank invites the state to take the web portion of the assets and liabilities and to pay the external debt of the Corporation, exchanging Eurobonds of VEB on the issue of its Eurobonds, the newspaper “Vedomosti” with reference to sources.

Rate is a matter of negotiation, but it should be comparable, said the publication of one of the officials. If investors do not agree, the paper would have to repurchase them on a multistep procedure: issuing and placing Eurobonds, the state will draw money and submit them to the web as a Deposit, which the Bank will repay its Eurobonds. And then this Deposit will be deducted.

Final decision yet, but the Finance Ministry’s proposals chances are high it supports most of the agencies allege two participants in the meeting in the government. The Ministry of Finance officially do not make comments on a situation. The Ministry is considering various options to recapitalise, said the representative of the Ministry.

According to the newspaper, on 30 June 2015 and the debt of Vnesheconombank amounted to about 1.2 trillion rubles (almost us $20 billion) on debt securities accounted for 974,6 billion rubles, including 535 billion rubles in Eurobonds.

The government faces a task to avoid default VEB, as well as to deal with distressed assets of the Bank, on whose support he constantly needs money from the budget. These assets the government intends to take, say the interlocutors “Vedomosti”. A significant share of loans issued to Ukrainian borrowers, loans for the Sochi objects. According to the proposed mechanism, VEB partially written off and liabilities, and the asset balance is reduced and the “hole” remains.

At the same time it is proposed to transfer to the Agency for Deposit insurance (DIA) two subsidiary banks, VEB – Svyaz-Bank and GLOBEXBANK. The transfer may take place with the participation of the Central Bank, which banks 212 billion roubles and to return the shares of the banks themselves and the obligations under subordinated loans from VEB.

As an alternative scheme for assistance to VEB minovici discuss the issue of OFZs, the newspaper notes. These papers VEB could provide the Central Bank on the mechanism of repo, and the loan would have sent for the payment of the debt, but the Finance Ministry and the Central Bank has opposed such a scheme. The option of Eurobonds was more acceptable for the budget, including from the point of view of the level of public debt, according to officials.

According to the newspaper, in the coming days, officials must decide assistance to VEB at a meeting with first Deputy Prime Minister Igor Shuvalov, and then from Prime Minister Dmitry Medvedev. Discusses different tools, including the recapitalization through OFZ, the “toxic” assets from the balance sheet of Vnesheconombank, which could be funding from the market, providing guarantees, and the adoption by the Treasury, and obligations, and assets of the Bank.

According to the newspaper “Kommersant”, the decision of problems with debts VEB may be slightly different from the debt of VEB Finance Ministry proposes to take on first through a transfer to VEB appropriate means (we are talking about approximately 100 billion rubles to pay for the debts in the first half of 2016), and then directly. These means VEB need to get to the end of the current year, so as not to violate covenants in agreements with foreign investors, said a source.

In exchange for state support, according to “Kommersant”, VEB will be donated to the individual assets to the Treasury or a special Fund. We are talking about assets worth more than 1 trillion rubles, and they will be transferred at nominal value.

In this case, as indicated by the sources, Svyaz-Bank and Globex are to be sold, the buyer will determine the Central Bank. Sale price must be equal to net asset value. A variant of the Agency for Deposit insurance and its subsidiary Bank “Russian capital”.

According to the newspaper, in addition to the above it is proposed to reduce the cost of funding for VEB in the domestic market – for example, to reduce the rates on foreign currency deposits of the national wealth Fund placed with VEB in the amount of slightly less than $6 billion, as well as to restructure the obligations of the VEB Bank to the Central Bank on 358 billion rubles (according to IFRS on 30 June 2015) with a lower interest rate.