VTB wants to finance Moscow-St. Petersburg high-speed railway with subordinated loans via NWF, in talks with MinFin

ST. PETERSBURG. July 4 (Interfax) - VTB and the Russian Finance Ministry are discussing the possibility of financing a high-speed railway (HSR) between Moscow and St. Petersburg with subordinated loans via the National Wealth Fund (NWF), VTB's first deputy CEO Dmitry Pyanov said during the Bank of Russia Financial Congress.

The HSR financing model, as reported, includes 580 billion rubles of funds from the NWF and Gazfond bonds worth 290 billion rubles.

"In our realities, the NWF, due to lengthy term and repayment requirements, has been invested in Tier 2 capital, in subordinated loans. This was the case when financing the reconstruction of the Central Ring Road and upgrading the Russian Railways locomotive fleet. We are now talking to the Finance Ministry about using the NWF as a means of issuing subordinated loans for the Moscow-St. Petersburg HSR. A Russian idiosyncrasy is that NWF funds are used as second-tier capital, which is meant to absorb credit risks," Pyanov said.

"There are NWF elements within the HSR financing structure, this was intended simply as shareholder financing. We are now saying let banks have NWF money as subordinated loan, and we'll replace the NWF money at our discretion, as we did for the Central Ring Road and Russian Railways," Pyanov told journalists later.

The MinFin in 2015 deposited 26 billion rubles with VTB for the construction of the Central Ring Road.