Translated material
Cheap money
Vnesheconombank again sets a borrowing record
Chairman of Vnesheconombank Vladimir Dmitriev yesterday signed an agreement to attract a three-year loan in the amount of $800 million with representatives of a syndicate of 28 largest foreign banks. The rate at which VEB raised money is the lowest for similar transactions concluded by Russian banks - LIBOR plus 0.35%. The lead arrangers of the transaction were Deutsche Bank, Dresdner Kleinwort, The Bank Of Tokyo Mitsubishi UFJ and Raiffeisen Zentralbank Oesterreich.Currently, the three-month LIBOR rate is 5.5% per annum; Russian banks, as noted in a VEB press release, have not managed to fall below LIBOR plus 0.375%. “This is a very good profitability for the bank,” Alexander Kudrin, an analyst at Troika Dialog Investment Company, assesses the terms of the loan raised by VEB.
It is noteworthy that Vnesheconombank has set such a record for the second time, setting the vector of movement for the Russian banking sector. A year ago, VEB also received a syndicated loan, which at that time turned out to be the cheapest and largest for Russian banks - $500 million for three years at the rate of LIBOR plus 0.9%.
VEB intends to use the funds received to develop infrastructure projects and promote high-tech and capital-intensive export products. According to the bank, part of the funds from the new loan will be used to refinance last year’s loan.
Vnesheconombank does not intend to attract borrowed funds on the Eurobond market, as Vladimir Dmitriev said yesterday. As is known, formally VEB does not have a banking license from the Central Bank, it belongs to the Russian government and is its agent. “This status prevents the bank from entering the Eurobond market,” explains Alexander Kudrin. According to Mr. Dmitriev, the placement of debt securities on foreign markets will become possible after VEB is transformed into a Development Bank. The history of the creation in Russia of a bank engaged in state investment projects has been going on for several years. Russian President Vladimir Putin stated that the new Development Bank will appear before the end of the year. In the spring, Vladimir Dmitriev presented his plan for creating a new credit organization. However, so far none of the options he proposed has been sent by the government in the form of a bill for consideration by parliamentarians. However, yesterday the head of VEB was optimistic: “There are good preconditions that the bill will be submitted to the State Duma in September,” said Mr. Dmitriev.
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The yield on pension savings managed by VEB in the first half of 2006 amounted to 2.4% per annum. In absolute terms, income from investing VEB's pension savings in the first half of the year exceeded 2.245 billion rubles, VEB's expenses for managing these funds, including payment for the services of a special depository, professional market participants involved in the investment process, an auditor, and expenses for compulsory insurance amounted to 109. 62 million rub. At the end of the first half of 2006, the market value of net assets in which pension savings were invested increased by 4.5% - from 176.544 billion to 184.536 billion rubles. As follows from official documents of Vnesheconombank, the volume of pension savings invested by VEB in government securities is 89.4% of the market value of the investment portfolio - about 164.96 billion rubles, including in foreign currency government bonds - 18.42 billion rubles. (almost 10% of the market value of VEB’s investment portfolio).