In February this year Novgorod region were not able to make the payment on the loan VTB, told RBC representative of the regional department of finance.
The maturity of the loan was set February 25, 2015. To repay the loan, the regional government has announced auction to attract credit at an interest rate 23.63%, but failed to hold the auction. “Commercial banks, including OJSC” VTB Bank “has not filed an application for participation in the auction, considering this interest rate low enough” – said in comments that received RBC from the regional Department of Finance. As a result, the region still managed to negotiate refinancing of debt by VTB. “The Government of the Novgorod region held talks with JSC” VTB Bank “, which resulted in an agreement was reached on the reduction of interest rates. After that obligation to repay within a month “, – said the department. The amount of the loan was “about 2 billion rubles.”, Said a source in the department of RBC.
According to reports, VTB published on the website of the Central Bank of the Russian Federation, on March 1, 2015 the bank recorded overdue stuffiness from the subject of the federation at the level of 1, 68 billion rubles. The press service of the bank told RBC that the Novgorod region has no overdue obligations to VTB, leaving unanswered questions about whether to admit this or other areas, which the bank gave out loans overdue on payments and on what conditions managed to restructure the loan Novgorod region.
Previously, the agency S & amp; P reported that in the first quarter of 2015 at least one subject of the Russian Federation, which has no ratings agency, made late payments on bank loans due to the limited access to refinancing. In the terminology of S & amp; P means a default in the region: the agency believes a default situation, when “the borrower has not fulfilled the debt on time and in full,” not only failure to fulfill obligations under the bonds. Experts S & amp; P write that they are also known cases where “the lending bank was forced to roll over the region previously issued loan at a rate below the current market – due to the fact that the region has been unable to repay or refinance the loan.” “Depending on the details of such an operation similar event according to our definitions can be interpreted as an exchange offer of securities made under stress conditions (distressed exchanged offer), or the equivalent of default,” – the report says S & amp; P.
The Department of intergovernmental relations Russian Ministry of Finance information about the delinquency commercial debt in the established order of the state authorities of the Novgorod region has been received, a representative of the Ministry told RBC. The Finance Ministry did not respond to a question about the wording of default S & amp; P.
Why Novgorod
According to the Ministry of Finance as of May 1, the volume of commercial loans Novgorod region among the subjects of the Russian Federation occupies only 34th place. On May 1, 2015 debt to creditors this area amounted to 8.4 billion rubles. This is 57.6% of the total debt of the regions. The ratio of debt to income area on December 1, 2014 was 66.8% – on this indicator region is one of the twenty problem.
A source in the government of Novgorod Region said that the region was not lucky with the timing: the year has just begun, and in times of crisis no bank has applied for an auction, since all thought the interest rate 23.63% is too low. And this despite the fact that, according to the representative of the Savings Bank (according to BCS analyst Yulia Safarbakovoy, it now accounts for 70% of loans to the regions), regional lending rate is now in the range of 14-15% and is determined based on results.
«If the region needs to pay off a large amount of debt, part of the money he can get from the Ministry of Finance: the ministry provides assistance to the regions, to pay the debts in the current year – but it covers only half of the amount owed. The other half have to pay from their own resources or funds raised on the market “, – says the deputy director of the group of public finance S & amp; P Karen Vartapetov.
However, budgetary credit Novgorod region also could not get because 25 February has not been in their position distribution, said a source in the Department of Finance of the Novgorod region. “Already in March-May, these problems would not be” – he said.
repeated situation
Currently, about 90% of all loans issued by regional falls on VTB and Sberbank, said BCS analyst Yulia Safarbakova. The press service of the Savings Bank, RBC reported that delinquencies on loans to the regions over the past year was not. “Accordingly, the question of refinancing of arrears did not arise,” – said the representative of the bank.
When the financial market and bank lending market there is a lack of liquidity, growth rates, against the background of weak budgetary performance in the regions there are problems with refinancing : may be at risk of default, and then defaulted, says Karen Vartapetov. He cites the example of the 2008-2009 crisis: even if already signed credit lines the bank refuses to provide funds.
bank debt which attract the regions – this is often short-term debt, which creates refinancing risks, says Vartapetov. According to the criteria of S & amp; P, ratio of cost of debt service to the supply of liquidity in the region determines how high the risks for him. The debt of Russian regions is dominated by short-term bank loans to the report, S & amp; P. Experts say that this year because of rated S & amp; P regions large sum to be paid, in particular, the Krasnoyarsk Territory, but there “situation is under control».
«On the other regions a similar situation could happen again,” – RBC says Vladimir Klimanov, head of the department of state regulation of the economy FSE RANHiGS. Including the fact that this year there is a reduction of financial resources for assistance to the regions, he explains. In such a situation, he said, can be unpredictable subjects of the federation, said Klimanov. An example of the Novgorod region is indicative: the largest taxpayer in the region, the company “Akron”, deals with export sales and the weakening of the ruble had to show good financial results and, therefore, pay more taxes to the regional budget. “Maybe it’s the mismatch payments on time”, – says Klimanov.
In a press release, S & amp; P «Can the government prevent defaults regions in 2015?” It said that in the last 18 months, the agency has undertaken “predominantly negative rating actions.” This was due to the fact that against the background of weak economic growth, slowing earnings growth in the corporate segment and the nominal income of the population decreased revenues in the budgets of regions for income tax and personal income tax – the main source of income of subjects of the Russian Federation. “This increased pressure presidential decrees inflexible social spending leave little other choice regions, except to increase the deficit and the debt, getting to the unstable situation of financing current expenditure through borrowing,” – said in the report.
What S & amp; P means by default the region?
Credit ratings – it forecast for the agency’s ability and willingness to timely and fully perform its debt obligations. Accordingly, S & amp; P records in default if the borrower has not fulfilled the debt on time and in full. Financial market participants can rely on other definitions of default, says S & amp; P. The Agency has identified the following two aspects.
First, some market participants may consider the default region, only the failure of public debt, ie bonds. S & amp; P, in turn, by default understand the failure of any commercial debt, including bonds and bank loans.
Second, a certain group of market participants attached great importance to Besides default as a result of which the borrower is unable to fully carry out payments on its debt obligations, while the S & amp; P considers default any delay payments of principal or interest, even if subsequently made all payments in full. In other words, investors who claim that defaults regional authorities is impossible, as suggested by S & amp; P, mean a high probability of full compensation for defaulted regional commitments. According to S & amp; P, the latter statement is true in the Russian context, but it does not allow to accept the fact that defaults regional authorities are not possible.
From the perspective of S & amp; P, based on the definition of default, the creditworthiness of the majority of Russian regions differs significantly from the credit of a sovereign government, which is reflected in the ratings of S & amp; P: rating of the region range from BB to BB +, while the rating of the sovereign government’s foreign currency debt is equal to BB +, and on local currency BBB -.
Source: report S & amp; P «Can the government prevent defaults regions in 2015
How to solve the problem
According to the S & amp; P, in 2015 for deficit financing and repayment or refinancing regions will need to draw on the market before 0.9 trillion rubles. “The total demand for loans in the years 2015-2017 is estimated by us about 4 trillion rubles. This implies an annual 35 per cent increase in market borrowings of regions “, – experts write S & amp; P. Given the predicted stagnation in bank lending and the structural problems of the banking system, analysts say the agency that the access areas to the financial markets may be temporarily closed.
The Ministry of Finance decides to issue debt of regions by providing low cost loans to the regions. In 2015, it will be given additional financial assistance to the regions – they will issue 160 billion rubles. cost loans to replace more expensive commercial loans and government securities of the Russian Federation, in addition to those already laid down in the budget of 150 billion rubles. Bet on budgetary loans is 0.1%. This measure allows us to replace low cost loans to 50% of the portion due in 2015, the region’s debt to market debt, said a representative of the Ministry of Finance, RBC. Help will be given to those regions that perform agreement on the gradual reduction of the debt burden to January 1, 2017.
But even if federal financial assistance aimed at reducing the risk of refinancing, it often untimely and allocation criteria these funds are difficult to predict, says Vartapetov. “If help comes, and it is often the wrong time – after problems arose,” – said the expert.
So, in 2009, Tomsk region, having the rating BB-, has not received a budget loan to refinance bank credit, when access to the financial markets for the region was actually closed – as a result of the region hardly avoid default. In 2008, the Moscow region admitted the failure of the offer under bonds of a company and support from the federal budget received after the occurrence of default.
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