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EBRD makes first rouble-denominated loan
Bank converts part of the City of St. Petersburg's debt from dollars to roubles
The EBRD, the biggest lender to the City of St. Petersburg, is helping convert part of the city's outstanding dollar-denominated debt to the Bank into roubles to give added strength to St. Petersburg's financial stability by reducing its exposure to foreign currency risk.
The transaction involves retiring US$16 million of the city's debt to the EBRD. A new rouble loan for the equivalent of US$16 million has been signed. This is the EBRD's first rouble-denominated loan, and will be a crucial test for the Bank's plans for a wider local-currency lending programme in Russia.
"Reducing the city's hard currency debt will enhance its creditworthiness by reducing its foreign-exchange risk," said David Hexter, Deputy Vice President of the EBRD.
The EBRD extended a US$40 million loan facility to St. Petersburg in July 1998 to restructure high-interest-rate, short-term debts the city had contracted on the local market. The first tranche was disbursed a few weeks after the August 1998 Russian financial crisis. The deal, known as the St. Petersburg Municipal Support Project, has proved an outstanding success and the city is now widely regarded as running the best debt-management policies of any Russian sub-sovereign borrower.
The EBRD is providing about €350 million for various projects in St. Petersburg. These include a DEM 35 million loan to the water-supply and treatment company Vodakanal, a US$ 5.5 million loan for the cleanup of the city's only toxic-waste treatment plant Krasny Bor, and several private-sector projects, including hotels, breweries and a business centre.
The new rouble loan represents the first time that an International Financial Institution lends in local currency to a Russian entity, and should open the way for lending roubles to other Russian municipalities and other entities whose revenues are earned mainly in roubles.
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