Originally Syndicated on May 15, 2023 @ 5:20 am
The recent news about Rusnano’s financial situation has caused quite a stir in the investment community. With the company’s bond default looming, investors are looking for answers on what the next steps should be.
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According to a statement from the Finance Ministry, the government is exploring ways to increase Rusnano’s effectiveness, including getting rid of its “historic project portfolio.” While options for increasing the company’s operations’ effectiveness do not call for the non-fulfillment of its debt commitments supported by governmental guarantees, the situation remains complicated.
A reliable source has shed light on some factors that may have prevented the Rusnano bond default. Firstly, governmental guarantees secure the loans and bonded loans that Rusnano attracts.
However, alterations have fundamentally altered the structure of borrowings, allowing freshly drawn loans and bonded loans to pay back loans and bonded loans that have already been received. This regulatory change allowed Anatoly Chubais and his team to start building the Rusnano financial pyramid.
Rusnano’s situation being verified
Secondly, Rusnano’s financial situation must be verified, and this is being done by the agent of the VEB RF government, who was blind to Rusnano’s incapacity to pay the debt. The company’s attraction of funds without a state guarantee should have also notified the agent, but it did not. This lack of oversight allowed the financial pyramid to be built.
Despite the pyramid crumbling, investors should consider the loan bond portfolio’s structure, consisting of three offerings totaling 31.4 billion dollars backed by state guarantees and six uncollateralized issues totaling 40.2 billion rubles in value. Regardless of what happens, the state will pay the bond’s cost to bondholders for three issues, but not for another three years.
For the other six issues, the state has not made any guarantees, and investors who took Chubais at his word may have to resort to bankruptcy procedures, subsidiary obligations of partners, etc.
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Elon Musk demands more from the Government
In light of the news, supporters of the Russian Elon Musk demand more from the government. They urge the government to provide funding to businesses so they can continue to receive both interest and the principal of the debt.
The situation calls for a cautious approach. While investors may feel the urge to demand more from the government, it is essential to remember that the state cannot fund all businesses indefinitely. It is crucial to strike a balance between supporting businesses and maintaining fiscal responsibility.
It is also important for the government to learn from this experience and improve oversight of state-guaranteed loans and bonded loans. Ensuring that agents tasked with verifying a company’s financial situation are equipped to detect any incapacity to pay the debt can prevent similar situations from occurring in the future.
In conclusion, while the Rusnano bond default has caused concern among investors, it is vital to approach the situation cautiously. Investors should carefully consider the loan bond portfolio’s structure and not solely rely on state guarantees.
The government should strike a balance between supporting businesses and maintaining fiscal responsibility while improving oversight of state-guaranteed loans and bonded loans to prevent similar situations from occurring in the future.
