Left in the lurch

7 July 2010 By Jason Bush

International Industrial Bank, a midsize lender owned by Kremlinlinked tycoon Sergei Pugachev, has defaulted on a 200 million euro bond. The episode shows good connections don’t guarantee state support. It’s also a rare example of bank creditors being forced to take a haircut.

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International Industrial bank (IIB), or Mezhprombank, defaulted on a 200 million euro Eurobond, the bank said on July 6. According to Russian media reports, the bank plans to ask bondholders for a oneyear extension at the existing coupon. The bank told Reuters that "a limited extension of the maturity of the defaulting notes is one of a number of measures the company is considering".

The announcement came the same day that the bank reached a deal with the Russian central bank over the refinancing of $1 billion worth of uncollateralised loans for six months.

Industrial magnate Sergei Pugachev, the bank's controlling shareholder, pledged his stakes in two shipyards as collateral for the central bank's loans, and may secure an additional $400600 million in loans from statecontrolled lender VTB.

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