Business
Sanctions fears stymie Russian companies' panda bond sales push in China
Sanctions fears stymie Russian companies' panda bond sales push in China
About this update from Rusal
Russian companies' plans to tap China's vast bond market for low-cost funding are proving to be a non-starter as Chinese banks and investors steer clear of them on concerns about Western sanctions, sources said.The conundrum shows the challenges Russian companies face to raise capital even in a country that has stood by it as an ally after Moscow's invasion of Ukraine more than three years ago.It is also a test for Beijing which has forged a so-called no-limits partnership with Russia at the same time as it is seeking to reach a trade deal with Washington.Top Russian companies, including state nuclear corporation Rosatom and giant gas concern Gazprom RUS:GAZP, are exploring sales of yuan-denominated "panda" bonds, Reuters reported last month, citing company sources.The news came just after Russian President Vladimir Putin visited China in early September. Russian companies have been cut off from the West's capital markets since the Ukraine invasion.Chinese bankers and investors, however, brushed aside the near-term prospect of any panda bond issuance by Russian firms, and a person with direct knowledge of the matter said that regulators and banks were wary of secondary sanctions risks."Preparation has always been underway, but you just cannot push the project forward," said the person, citing a lack of progress over the past year in the panda bond issuance push by Rosatom and Russian aluminium producer Rusal RUS:RUAL.Rusal declined to comment. Rosatom, which is not under U.S. sanctions, although its top management has been sanctioned, declined to comment.Gazprom, which cannot raise financing in the U.S. or Europe but has not been hit with U.S. blocking sanctions known as SDN List, did not respond to a request for comment.A Chinese securities exchange official said that he was not aware of any concrete issuance plans by Russian companies, and several Chinese onshore bond investors said they would be wary of buying such debt due to the geopolitical risks.All the five sources who spoke to Reuters for this story declined to be named due to the sensitivity of the matter.China's state-owned brokerages such as Galaxy Securities SSE:601881 have dropped Russia-related deals after 2022, while the "Big Four" state banks are unwilling to underwrite such bonds due to the geopolitical concerns, said the first source.Galaxy did not respond to an emailed request for comm...