16 | ifr special report | April 2008 RUSSIA AND CIS LOANS ROUNDTABLE
Christian Eberl, UniCredit Market & Investment Banking; Benjamin Binetter, BNP Paribas; James Nisbet, VTB Europe “
Corporate lenders are a much smaller
group of arrangers who do these deals and they are much more aware of the fact that now is not the time to be really trying to push pricing down.
bank name in the secondary market, you are having to give it away at maybe a four or five percent discount. That to me is the real cost of these financings. That is where they really should be priced, stripping the relationship and competition factor to arrange the deals. But there are a number of banks in the market who will go into a deal irrespective of the return they are making, simply because they can be a mandated arranger,
and internally it looks good, and they can go to their management and say, “haven’t we done well, we have been an MLA on this deal”. But I think those banks will start to suffer going forward, and the market will suffer if that continues. Ben is right, there is a much more sensible rationale with the corporate market; corporate lenders are a much smaller group of arrangers who do these deals and they are much more aware of the fact that now is not the time to be really trying to push pricing down. If anything, we should be doing the opposite.
William Sharpe: Even more than for corporate borrowers, Russian banks’ indications become top heavy in primary syndication. Even before the liquidity crisis, the strategy was to get as many MLA title banks in at the top level to generate as much liquidity as possible for the syndication. One of the results of that was that before where certain players only came in secondary, they were able to come in primary, so that even before the crisis, the secondary market was shrinking for Russian FIs, there was more appetite in primary and more appetite at the top level. In terms of corporates, you
have seen the majority of the funds being comprised of the MLA group - you have seen that as a sort of defensive mechanism to the crisis, whereas Russia had already used that and exhausted that, and so that in terms of FIs, this explains why there is perhaps less liquidity for Russian FIs in primary today.
IFR: Does that have a knock-on effect for the rest of the economy? How keen is the Russian government to see the FIs supported.
William Sharpe: The advantage the Russian government has today is that they are much more liquid and they have much more resources thanks to foreign currency reserves. So we have seen them try to support Russian banks domestically in terms of interbank funding in roubles, so clearly they are committed to supporting the banks in terms of their liquidity position. They are able to do so and they want to avoid a crisis, but that does not really help the Russian banks in terms of tapping the international markets, loan markets and bond markets.
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