Troubled debt buyers approach lenders for Russian assets
Several banks are in talks with potential buyers in a bid to offload exposure to Russian corporate loans as the market remains volatile following the Ukraine crisis, according to Reuters report citing several banking sources.
However, distressed buyers are said to be reluctant to act due to limited trading activity caused by price uncertainty and further sanctions.
Two sources said many buyers of distressed debt approached banks holding Russian loans, considering a potential sale of exposure at a discount.
Another banker told the news agency he had backed out of an offer to buy the loan from some Russian companies, fearing further sanctions could hurt the ability to recover value.
According to data from the Bank for International Settlements, foreign banks have approximately $120 billion in exposure to Russia.
The talks, which are at a very early stage, signal uncertainty among lenders about how to manage their exposure to Russia.
Banks choose to get rid of their exposure through bilateral transactions because they don’t want to be perceived as getting rid of paper in the market.
According to the report, the troubled debt offices of two US banks approached another banker to discuss possible interest in offloading the sales.
The banker reportedly said: “I think they could say they’re interested, it’s exciting for struggling markets, but I think we’re a long way from seeing real liquidity.”
Several sources added that the difficulty in deciding the price of Russian assets further limits activity, in addition to the risks of sanctions.
Some view the dips as temporary and would rather hold their ground than sell at deep discounts, they added.
This week, JP Morgan announced that it would exclude all Russian bonds from its emerging market indices by the end of the month.
This decision should add new constraints to the trading of Russian paper.