Henry Kirby in London -
The volume of syndicated loans issued to Russian borrowers plummeted 75% in one year, according to a note by financial software company Dealogic.
EU- and US-led sanctions against Russian companies appear to be taking their toll, after only four syndicated loan deals were signed with Russian companies so far this year, with a total value of $1.9bn – down from $7.5bn in the same period (January 1 to August 11) in 2014 and over $35bn in 2013.
The sanctions have forced Russia’s hand in turning eastward to China for alternative forms of financing. This is coming at a cost, as planned agreements to unlock Chinese funds for struggling Russian companies will likely rest on a proviso that would see the Russian state acting as guarantor, therefore shouldering the majority of any risk.
The difficult borrowing climate that Russian firms face comes at a time of added difficulty, stemming from concurrent falls in oil prices and the value of the ruble, which has led to eight consecutive months of double-digit inflation.
Evidence of Russian corporates’ desperation for access to capital markets can be seen in the sharp increase in corporate bond yields since sanctions were imposed early last year, rocketing more than 25% from 9.6% in March 2014 to 12% at the time of writing.
The turbulent business environment in Russia has also impacted equities, with the dollar-denominated RTS index falling from 1,388 points at the beginning of 2014 to 831.6.
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