December 24, 2018 / 11:01 AM / 9 months ago

Russian companies looking into domestic infrastructure to place Eurobonds

MOSCOW, Dec 24 (Reuters) - Russian companies seeking to issue Eurobonds are looking into using Russia’s National Settlement Depository (NSD) in addition to global settlement and clearing platforms due to the ongoing risk of further U.S. sanctions, a top finance ministry official said.

For months Russia has faced uncertainty due to a threat by the United States to expand sanctions against Moscow and target holdings of new Russian state debt.

New sanctions have not materialised, at least for now, but foreign investors have reduced holdings of Russian bonds, while the government and companies are seeking to limit risks related to sanctions.

Konstantin Vyshkovsky, head of the state debt department at the finance ministry, told Reuters that major companies are studying the finance ministry’s track record in placing Eurobonds using NSD, the domestic vehicle that offers clearing, depository and settlement services.

These companies are looking at how to structure their Eurobond issues using the NSD and its link to the global clearing system Euroclear, the way Russia placed its latest sovereign Eurobond in November, Vyshkovsky said.

Russia raised 1 billion euros with the sale of its first euro-denominated Eurobond in five years, using the NSD and enjoying solid foreign demand despite the sanctions risk.

The NSD was launched in mid-1990s and transformed into a multi-role financial vehicle as part of the Kremlin’s ambitious plans to make Moscow a global financial before relations between Russia and the West worsened after Russia’s annexation of Crimea in 2014 and its role in the Ukrainian crisis.

Since then Russia has looked to bring its market infrastructure into line with the global practice, and now the NSD can offer the same range of services as its global peers, Vyshkovsky said.

“It would be naive to say that the NSD should have the same number of clients as Euroclear in a year from now. But we should aim at that.”

The finance ministry is not in a position to tell companies to clear their Eurobonds with the NSD and not Euroclear. But in order to avoid problems related to “actions of unfriendly jurisdictions” the finance ministry encourages companies to use the Russian platform, Vyshkovsky said.

To ensure that holders of Russian Eurobonds keep on receiving earnings from owning this paper, the bonds should be stored with the Russian depository and all settlements should be carried out using Russian infrastructure, Vyshkovsky said.

“Otherwise risks remain,” he said, adding that it was too early to say if the probability of sanctions on holdings of Russian debt had increased.

“I can’t say there’s a feeling that clouds are piling up and this is inevitable.” (Writing by Andrey Ostroukh; additional reporting by Katya Golubkova; editing by Jason Neely)

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