21 Sep 2009 14:06

Finance Ministry proposes OFZ scheme to settle Alrosa

SOCHI. Sept 21 (Interfax) - The Russian Finance Ministry wants to examine the option of contributing federal loan bonds (OFZ) to the capital of diamond monopoly Alrosa to be used to repay bank debt, Deputy Finance Minister Alexander Novak told Interfax.

Alrosa has yet to submit the documentation on receipt of state guarantees on its loans. "They notified [First Deputy Prime Minister] Igor Shuvalov's government commission that they needed to restructure 100 billion rubles in debt," he said. Under current legislation, Alrosa is eligible to receive at most 20 billion rubles in state guarantees.

However, the state guarantees are not the only form of support the company could receive. "Perhaps the assistance could come in the form of contributing OFZ to Alrosa's charter capital and it will use them to settle with creditor banks," Novak said, adding that no final decision has been made.

Alrosa declined to comment on the report.

The OFZ scheme has so far only figured in efforts to recapitalize banks. The OFZ are contributed in return for preferred stock. The scheme was approved in July but has yet to be put into practice.

At a meeting in Myrny in late August, Prime Minister Vladimir Putin ordered preparation of a mechanism for providing state guarantees to restructure Alrosa's debt to Russian and foreign creditors.

Sources in banking circles told Interfax in September that Alrosa might use the state guarantees in conjunction with a bond issue to refinance a portion of the debt.

"The banks are discussing that possibility with Alrosa, but no decision has been made," one of the sources said, adding that the option was appealing for the banks, since the obligations "can be traded, the obligations can be pledged."