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State to Choose Banks for Bond Sale

February 4, 2010

The government will choose banks to manage its first foreign bond sale in more than a decade as early as this week, Finance Minister Alexei Kudrin said Wednesday.

The decision will be made in the “next few days,” Kudrin said. The country is seeking to raise as much as $17.8 billion of notes, sold in several installments through 2010, in the first offering of new international debt since its 1998 debt default.

The government on Dec. 24 named 22 banks including Deutsche Bank, Goldman Sachs Group, Renaissance Capital and VTB Capital in its shortlist for organizing the sales. The government plans to use the money that it raises to plug a budget gap that may swell to 6.8 percent of gross domestic product, Kudrin said.

“The sale will be an important world event,” Troika chairman Ruben Vardanyan said in an interview. There’s a “big appetite” for Russian debt among investors, Vardanyan said.

The government had $19.8 billion of foreign-currency bonds outstanding, compared with $435.6 billion in international reserves, according to Central Bank data last month. The government exchanged its Soviet-era debt in 2000 for $21.2 billion of bonds maturing in 2010 and 2030 in its only offering of foreign-currency debt since 1998.

The yield on Russia’s 30-year benchmark dollar bonds maturing in 2030 dropped two basis points to 5.381 percent. Bond yields move inversely to prices.

Deputy Finance Minister Dmitry Pankin last month said it will not be “technically” possible to complete the first sale of foreign bonds until at least April. Russia is rated Baa1, three levels above noninvestment grade, by Moody’s Investors Service and one rank lower at BBB by Standard & Poor’s.

 

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