Chairman of the Duma Committee on the Financial Market Vladislav Reznik told Kommersantthat the bill on supporting the Russian financial market may be altered before its second reading next week.
Photo: Sergey Mikheev
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Vneshekonombank Aid Reaches Far
In the second reading of the draft law on support for the financial system, changes may be made to plans to allocate $50 billion to Vneshekonombank to replace credits by foreign banks to Russian companies. The Russian State Duma and Russian companies are asking the government and Russian President Dmitry Medvedev to allow Vneshekonombank to expand crediting to special purpose vehicles (otherwise known as special purpose entities) in the West and to finance companies using their export receipts as collateral. “We urged companies to acquire assets abroad but didn’t support them,” commented chairman of the Duma Committee on the Financial Market Vladislav Reznik.
Special purpose vehicles are affiliates created by Russian companies abroad. They are mainly located in Great Britain, Switzerland, Luxembourg and in offshore zones. They are used for the placement of Eurobonds and as profit centers. They are also often used for mergers and acquisitions. There are several hundred Russian SPVs, 13 of which registered 24 bond issues with the Russian Federal Financial Markets Service by January of this year. Those included Kuznetski Capital (an affiliate of the Bank of Moscow), VTB Capital, Salomon Brothers AG, Morgan Stanley Bank AG, Gazprom International, GAZ Capital (Gazprom), RSHB Capital (Rosselkhozbank), RBD Capital (RBR), Citigroup Global Market (Severstal), SB Capital (Sberbank), GPB Eurobond Finance (Gazprombank) and Norilsk Nickel Finance Luxembourg (Norilsk Nickel).
Observers note that the draft law now before the Duma differs from the American Paulson plan in that it identifies types of assets to support, rather than companies. Without provisions for SPVs, the measures will only benefit small companies that will not affect the general situation.
Large Russian companies are also lobbying for a riskier expansion of the support from Vneshekonombank, financing companies using their export receipts as collateral. “In this situation, it is necessary to consider the possibility of granting of unsecured credits using a multifaceted evaluation of the potential of every company,” a source in one of Russia’s largest companies explained to Kommersant.
www.kommersant.com
All the Article in Russian as of Oct. 08, 2008
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