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Russia: Oneximbank Fails To Make Eurobond Payment

  • Floriana Fossato



Moscow, 3 February 1999 (RFE/RL) -- Oneximbank became the first Russian bank (Feb. 1) to default on a Eurobond payment when it failed to make a regular interest payment of $12 million.

Analysts say the failure may set a dangerous precedent.

Before last year's Russian financial crisis, Oneximbank was the country's third-largest bank in terms of assets. Now, like many other big banks, Oneximbank is in deep trouble.

The bank is the investment arm of the Interros group, controlled by Russian tycoon Vladimir Potanin. Analysts speaking on condition of anonymity told RFE/RL that Oneximbank owes about $650 million to foreign creditors.

Other banks, including SBS-Agro and Bank Rossiisky Kredit, are reportedly in a similar state and could follow Oneximbank's example.

Eurobonds are a special type of investment. Unlike the large government loans that Russia has received, Eurobonds are held mainly by small financial funds operating on behalf of private investors.

Since many investors hold Eurobonds, there aren't likely to be any special agreements on restructuring their payment terms. This means, in theory, holders of the bonds can initiate legal action against the bank in 14 days.

Besides private banks, some regional governments have also floated Eurobonds. Until now, interest payments on them have been met regularly, according to one analyst.

Russia's top foreign debt negotiator, Deputy Finance Minister Mikhail Kasyanov, has repeatedly said Russia will stick to its commitment to service all post-Soviet-era debts, including Eurobonds.

Russia this year is due to pay a total of $17.5 billion in foreign debt, including $1.6 billion in sovereign Eurobond payments. However, officials say that even under the best conditions they will only be able to cover about $9.5 billion of payments.

The Oneximbank affair, analysts say, also highlights the differing fates of Russia's troubled "oligarchs."

Potanin was reportedly close to the "young reformers" who lost their cabinet jobs following the financial collapse in August. Since the meltdown, Potanin has received little financial support from the central bank, led by Soviet-era banker Viktor Gerashchenko. Other former oligarchs, whose financial institutions are considered more "socially important," have been bailed out by the bank.

Oneximbank is only one of Potanin's problems. Last week, an obscure Russian company (Beta Eko) filed a bankruptcy claim against one of Interros' main assets, the Sidanco oil company. Interros owns 85 percent of Sidanco, once Russia's sixth-largest oil producer before being stripped of some assets by the courts.

Last week, Sidanco failed to pay a 500,000 rubles ($22.1) loan. A Moscow arbitration court is to consider the claim next month.

According to Bloomberg News, Sidanco has more than $340 million in foreign debt and another $60 million in ruble debt. The company is 10 percent owned by a British Petroleum-Amoco.

Analysts say, though, the company is not likely to face bankruptcy immediately. Court proceedings will give the company at least six months time to meet its obligations. Outside management is also reportedly being set up.

Oleg Sapozhnikov, an aide to Sidanco Board Chairman Boris Jordan, told Bloomberg that seizures of the company's property could be postponed as long as 18 months.

British Petroleum says it remains committed to cooperating with Sidanco.

Russian media has reported that Interros itself may have initiated the bankrupting in order to start a new company free from debt. Sidanco has denied the charge.
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