VimpelCom Credit Risk Surges as Ruble Hits Business


The cost of insuring losses on VimpelCom Ltd. debt surged after the steepest slide in the ruble in 16 years triggered concerns the company will struggle to meet its obligations.

Credit-default swaps on the Amsterdam-based company, which gets the largest proportion of its revenues from Russia, rose 103 basis points to 829 basis points, according to data from CMA. VimpelCom’s $1.5 billion of 7.5043 percent notes due March 2022 tumbled 17 cents on the dollar to 62.3 cents, according to data compiled by Bloomberg.

“There is a re-pricing of Russia risk due to the economic issues, but it’s just a large overreaction from the investment community,” said Dmitry Dudkin, the head of fixed-income research at Uralsib Financial Corp. in Moscow. “The real risks for the companies are limited because most of the corporate borrowers in the Eurobond market are exporters, so the currency fall could actually help them.”

Russian borrowers are facing higher costs after the ruble sank below 80 a dollar for the first time yesterday. The nation’s Finance Ministry started selling foreign currency today in a bid to stem the decline in a currency it says is “extremely undervalued.”

Bonds issued by other Russian companies also extended declines, with state-run gas exporter OAO Gazprom’s 750 million euros ($937 million) of 3.6 percent bonds falling for a 17th day to a record 71.7 cents, according to data compiled by Bloomberg.

Russian Railways’s 500 million euros of securities fell 1.6 cents to a low of 68 cents, the data show.