-Caveat Lector-
Russia heads for debt default
Tuesday, 29 December 1998 22:48 (GMT)
(UPI Focus)
Russia heads for debt default
LONDON, Dec. 29 (UPI) - Russia is heading for default on $22 billion
of commercial debt dating back to the Soviet era as industry sources
expressed doubt it could meet a deadline for a $362 million payment to
western commercial banks.
As Russian officials met with Club of London creditors there was no
indication that Moscow had met the deadline.
One banking source said, "If they fail to pay as expected, they'll
be in technical default."
Financial sources said that as of late tonight, Russia had failed to
secure overwhelming agreement of creditors to restructure the payment.
The government needed to secure 95 percent support from its creditors to
restructure the payment it missed on Dec. 2 into new bonds. Last week,
Russian officials indicated they had only 72 percent approval.
Today marks the end of a grace period during which Russia could have
made the payment without being in default. For several months now Russia
has been campaigning to restructure a part of its foreign debt to reduce
its overall debt burden.
The strategy is crucial to Moscow's bid to reduce Russia's budget
deficit. As part of the program, Russia wants to reschedule about $7
billion in payments owed since the Soviet era to banks and governments
and due next year.
The International Monetary Fund (IMF) suspended payments on a $22.6
billion loan package it negotiated after Russia defaulted on 281 billion
rubles ($13.4 billion) of domestic debt in mid-August.
Russia also defaulted on some of its Soviet-era debt to sovereign
creditors, missing an interest payment on 751.5 million deutsche marks
($449.8 million) due to Germany in August.
It paid only 48.5 million marks of the 800 million marks due in
interest payments on loans from government creditors due Aug. 20.
But payments to sovereign creditors, said to total $5.4 billion next
year, can only be restructured after the IMF approves a loan program for
Russia. IMF officials have said they plan to return to Moscow in January
to examine Russia's state budget. The budget is currently being debated
in Russian parliament.
--
Copyright 1998 by United Press International.
All rights reserved.
--
Copyright 1998 by United Press International
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