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24.11.2008 - MDM Comment: Color, Ruble, Evraz, MiG

Key story in Russia today is of course another weakening of ruble against the bicurrency basket. The Central Bank’s offer for the basket moved from 30.70 to 31.00, i.e. ruble lost another 1% of its value. Due to EUR strength today, the actual move in RUB/USD rate was a marginal one (10 kopeyks only).
It appears now quite likely that if oil price remains where it is, we will see two or three more moves on devaluing ruble against the basket of similar magnitude before the year-end. However, it is not easy to make money on this trade given the shortage of rubles in the system and sky-high currency swap rates (70-80% for 1 week). In fact today we are seeing basket trading below the Central Bank’s new offer level, as many corporates and banks are forced to sell USD in order to get some ruble liquidity for payment execution purposes.
We haven’t seen any exciting corporate news today. Still perhaps it is worth mentioning that VEB reportedly approved a USD1.8 bn loan to Evraz (Ba2/BB-). This obviously reduces short-term refinancing risks for the steel group. We feel that the EVRAZ 09 issue (offers approximately 25% to maturity in August 09) may be of interest for investors on the back of the VEB financing news.
Also Kommersant daily reports that MiG (NR), the famous producer of jet fighters, may postpone its integration into United Aircraft Corporation until the problems with its extreme debt burden are resolved (perhaps, to avoid further damage to UAC’s consolidated numbers). State officials are working on a plan to provide financial support to MiG, which is barely breaking even and has some RUB40 bn of debts. We note that talks about a potential bailout of MiG have been around for a while, but so far nothing has been done. MiG’s RUB3 bn bond issue with a put in December is currently trading around 90% price wise.

24.11.2008 14:08
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