Russian revolutions

4 July 2003

First came the rally in government bonds, then the boomlet in Russian M&A. Now it s the turn of corporate bonds. This is partly a sign that corporate Russia is coming of age. But if the government is worried about a bubble, investors need be too.

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Russian corporate borrowers have rapidly increased their issuance of debt in foreign markets over the past two years.

In the first five months of the year, bond issuance totalled $3bn, according to Standard & Poor's, compared to last year's $3.5bn total. Oil company Yukos is widely expected to launch a $1bn bond later this year. Stateowned Gazprom, the world's biggest gas company, issued a $1.75bn 10year bond in February.

Total Russian corporate external debt is expected to reach almost $44bn by the end of this year, S&P estimates, compared to $17bn at the end of 2001.

The government, concerned by the billions of dollars of overseas debt issued by companies, has said it may limit access if the borrowing runs out of control.

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