(Bloomberg) — Russian companies locked out of international capital markets by sanctions and facing punitive borrowing costs at home are about to see conditions ease.
The government next month will hand back to private pension managers as much as 530 billion rubles ($10.4 billion) of employer contributions it kept in 2013. These institutions invest about 40 percent of their assets in corporate bonds, according to VTB Capital.
Russia initially diverted money from retirement funds to revamp the industry in 2013 and then continued seizing contributions to shore up the budget as Western sanctions over Ukraine and collapsing oil prices crippled the economy. The government is now moving part of the money back to boost domestic savings because this is the “only potential source” for a recovery in local bond markets, Deputy Finance Minister Alexey Moiseev told Bloomberg this week.
“With the inflow of pension money, we’ll see demand for new corporate issuance and supply will follow as companies have been accumulating debt-placement plans,” Evgeny Malykhin, the chief investment officer at Aton Asset Management in Moscow, said in an interview on April 20. “The yield spread of first- class corporate borrowers versus the sovereign could shrink.”
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The country’s corporate bonds have returned 6.9 percent this year, less than the 13.6 percent on sovereign notes, Moscow Exchange data show. While the yield on ruble-denominated company bonds dropped to a 2015 low this week, according to a UralSib Capital index, it has almost doubled since Russia’s incursion into Crimea in March 2014, which led to the isolation of the country’s borrowers from international markets.
State-owned OAO Rosneft, OAO Sberbank and VTB Group can’t raise capital in the Western world because of sanctions. Plus, Sberbank and VTB have debt due this year.
Russia plans to give in May non-state retirement funds the diverted savings from 2013 and personal savings that people transferred from Vnesheconombank to private funds, Moiseev said.