UPDATE 5-Russian banker backtracks on "debt restructure"

* Banker backtracks on debt restructuring plan

* Kremlin says no plans to restructure Russia corporate debt

* Russia says corporates continue to service debts as normal

* Source cited by Nikkei says its report is “untrue”

* Euro pares some losses against dollar, yen, after denials (Adds more Aksakov quotes)

By Gleb Bryanski and Oksana Kobzeva

MOSCOW, Feb 10 (Reuters) - The Russian government said it had no plans to restructure up to $400 billion in companies’ foreign debts on Tuesday as a local banking lobbyist who floated the idea backed away from his proposal, made two months ago.

Earlier a report in Japan’s Nikkei newspaper had caused a sell-off in the euro by quoting Anatoly Aksakov, president of a regional banking association, as saying he had asked the government to broker talks with foreign lenders on Russia’s corporate debt.

“The government of the Russian Federation does not plan to consider the issue of restructuring the corporate debt of Russian banks and companies,” Finance Minister Alexei Kudrin told Reuters when asked about the report.

Kremlin chief economic aide Arkady Dvorkovich said no such proposals had been made and that Russian companies were continuing to service debt as normal.

Aksakov told Reuters he sent a letter to Russia’s First Deputy Prime Minister Igor Shuvalov in December asking the government to help organise a discussion -- not negotiations -- between lenders and creditors.

“Now that I see the market reaction (today), I am convinced the government should keep its distance,” he said.

Aksakov said he got the original idea after watching a presentation by consultants from KPMG on different countries’ experiences of corporate debt restructuring.

The initiative was backed by some members of his association, mostly subsidiaries of foreign banks, Aksakov added.

He said Shuvalov did not respond to his letter.

“I did not ask the government to moderate negotiations between lenders and foreign banks ... Only some companies have problems with their foreign debt and they should negotiate directly with lenders,” Aksakov said.

Aksakov named the world’s largest aluminium producer Rusal, controlled by tycoon Oleg Deripaska, as one of the companies having problems with its foreign debt. [ID:nL1237270]

Though the Nikkei report was denied by the Kremlin the market reaction indicated a concern among investors over the $136 billion in foreign debt and interest which Russian companies must pay this year.

Fitch this month cut Russian foreign and local currency ratings by one notch to “BBB”, two rankings above junk, after a similar move by Standard & Poor’s, which in December became the first agency to downgrade Russia in a decade. [ID:nL476617] [ID:nL888200]

After the Fitch downgrade Russia said it would no longer help refinance the private sector's foreign debt, saying banks and firms have enough foreign currency to cover their current liabilities. The spread between Russian sovereign debt and U.S. government debt widened about 11 basis points to 588 basis points, according to JP Morgan indexes 11EMJ. Russia's benchmark 2030 Eurobond was little changed RU011428878=.

The euro was down around 1.2 percent at $1.2850 earlier, but by 1626 GMT the euro was trading at $1.3048 [FRX/]. Traders said the euro moved because of the European Union’s strong trade ties with Russia and EU banks’ exposure to Russian borrowers.

“Even though the denials are now being reported, the story will weigh on sentiment towards Russia, the European banks and the euro as many will take the view that where there is smoke there is a story,” said Chris Weafer, a strategist for Uralsib investment bank in Moscow.


Some of Russia’s biggest companies borrowed billions of dollars in the boom years under former president and current Prime Minister Vladimir Putin and have been badly hit by the economic crisis.

Russian banks had $198 billion in outstanding foreign debt as of Oct. 1 and non-financial institutions had $300 billion, according to the latest data available from the central bank. [ID:nLT483385]

The Nikkei business daily had reported that some foreign banks, including HSBC HSBA.L0005.HK and Deutsche Bank DBKGn.DE, had indicated they would like to have debt refinancing negotiations. Deutsche Bank and HSBC both declined to comment.

“There are no such plans in the government,” said Russian government spokesman Dmitry Peskov. “Information regarding any talks with foreign banks on the subject of restructuring does not reflect reality.”

Russia has spent more than $10 billion on helping refinance corporate debts. But it recently said it would use the rest of the $50 billion facility for other unspecified objectives. [ID:nL4224470]

Debt traders note some Russian corporate Eurobonds are trading with yields as high as 80 percent <RU/EUROBONDS>, indicating high default risk.

And the Nikkei report brought back memories of the chaotic years under late President Boris Yeltsin and the 1998 crisis when Russia defaulted on $40 billion in debt and allowed the rouble to collapse.

“Putin’s big picture vision is for Russia to avoid a return to the devaluation-cum-default of 1998-2000 when Russia was forced to go cap in hand to foreign G7 creditors,” said Tim Ash, an economist at Royal Bank of Scotland in London.

“The Putinists absolutely detest the Yeltsin era, it is their nemesis, and will do everything possible to avoid a re-run of the absolute humiliation of 1998,” he said.

But with Russia heading into the worst crisis for a decade after the prices for its main raw materials exports tumbled, the large reserves built up during the years of the oil boom have been quickly eroded.

Russia has spent a third of its foreign exchange reserves, or about $200 billion, over the past six months to ease pressure on the rouble. Russia has also injected cash into the banking system in an effort to help major banks which say they are facing increases in bad loans. (Additional reporting by Antonina Vorobyova and Dmitry Zhdannikov in Moscow; Writing by Guy Faulconbridge; Editing by Elaine Hardcastle, Greg Mahlich)