Russia

Russian companies shut out of Western markets as a result of the Ukraine crisis are scouting the possibility of raising cash via Chinese or Singapore bonds instead, even if a large scale funding switch to Asia is likely to be a tall order, Reuters reported. Asian investors, eyeing the risks associated with Western sanctions, could prove a hard sell. Usually prolific borrowers, Russian firms' bond and loan issuance this year has languished as lenders fear getting caught up in U.S.

With tensions over Ukraine continuing to mount, Russia is scrambling to stem the economic fallout, as its central bank unexpectedly raised a crucial interest rate on Friday, the International New York Times reported. The move is intended to help halt the slide in the country’s currency and stem the exodus of capital, both of which are intensifying the country’s economic problems. Hours earlier, the rating agency Standard & Poor’s downgraded Russia’s debt to the brink of junk status, citing the destabilizing effects of capital flight from Russia.

Russian companies, facing $115 billion of debt due over the next 12 months, will have the funds even as bond markets shut because of the Ukraine crisis, according to Moody’s Investors Service and Fitch Ratings. Firms will have about $100 billion in cash and earnings at their disposal during the next 18 months, Moody’s said in an analysis of 47 businesses April 11. Almost all 55 companies examined by Fitch are “well placed” to withstand a closed refinancing market for the rest of 2014, it said in a note on April 16.

Rusal has received approval from its lenders for “forbearance”, in a move that will stave off default as it seeks to hammer out a restructuring of its $10bn net debt pile, the Financial Times reported. The world’s largest aluminium producer has been negotiating with creditors since last year to change the terms of its debts, as its profitability is weighed down by aluminium prices at four-year lows. However, it failed to receive the necessary unanimous support from a group of international banks before a repayment that was due this week.

Russian capital outflows in the first quarter were the largest since the last three months of 2008 when the collapse of Lehman Brothers Holdings Inc. triggered the biggest credit squeeze since the Great Depression. Net outflows totaled $50.6 billion, more than double the $17.8 billion that left in the previous quarter, the central bank in Moscow said in a statement on its website today. In the final quarter of 2008, capital outflows were $132.1 billion. Outflows for the whole of last year reached $59.6 billion.

Russia’s economy is on the brink of a technical recession this quarter after gauges of manufacturing and services showed that seasonally adjusted output probably shrank between January and March for the first time since 2010, Bloomberg News reported. The composite purchasing managers’ index dropped to 47.8 last month from 50.2 in February, HSBC Holdings Plc said today in a statement, citing data compiled by London-based Markit Economics. A reading below 50 indicates contraction. Business expectations in the services industry were close to a record low seen at the end of 2008, HSBC said.

Rusal, the world's largest aluminium producer, could default on some of its multi-billion dollar debt if it fails to reach a new deal with creditors this week, it said after reporting its biggest annual loss since 2008, The Sydney Morning Herald reported. The company's earnings have been hammered by low aluminium prices, which in 2013 fell back to levels last seen in the aftermath of the financial crisis.

Russia faces a growing risk of recession as a hemorrhaging of $100 billion in capital this year may bring the economy to a near standstill, according to analysts and government officials, Bloomberg News reported. Gross domestic product will expand 1.2 percent in 2014, according to the median estimate of 37 economists in a Bloomberg survey. That compares with a 2.2 percent forecast in last month’s poll. The economy may stagnate at rates below 1 percent and contract if capital outflows reach $150 billion, Economy Minister Alexei Ulyukayev said at a conference in Moscow today.

The Russian government is braced for the country’s capital outflows to soar to $70bn in the first three months of the year as investors seek cover from the fallout of President Vladimir Putin’s Ukrainian land grab, the Financial Times reported. Andrei Klepach, Russia’s deputy economy minister, said on Monday that capital outflows in the first quarter were expected to be closer to the top end of a $65bn-$70bn government estimate, as fears of tighter sanctions hit the economy.

Two companies have filed bankruptcy suits against Kosmos, one of the country's oldest construction firms, The Moscow Times reported. Moskapstroi-Nedvizhimost, a Sistema subsidiary, said it paid Kosmos 100 million rubles ($2.7 million) last fall as part of a reconstruction project in central Moscow, but that work had still not begun, Vedomosti reported. A Sistema employee said that the two sides had reached a settlement agreement and that the money would be returned. The second bankruptcy case, filed by Tsniis, a civil engineering company, is due to be heard April 4.