By Ivan Anderzhanov
Russia's International Industrial Bank suffered the indignity yesterday of becoming the country's first private bank default on an external debt in over a decade.
Owner Sergey Pugachyov was close to former President Yeltsin's clan and was once seen to have had reasonably good ties with his successor Vladimir Putin. His latest woes would indicate he has fallen outside the circle of trust, maybe even the garden ring or the MKAD of trust. Tin pot lenders and brokers, with little to middling Kremlin influence, were chucked lifejackets full of cash when the crisis struck in late 2008.
International Industrial Bank, or IIB as it is known, defaulted on a 200 million euro ($250 million) eurobond due in 2010, the bank said late Tuesday.
IIB, ranked among Russia's top-30 banks, has been the largest recipient of noncollateralized loans from the Central Bank since the credit lines started flowing from the Kremlin at the beginning of the current crisis.
The Central Bank stopped rolling over the debt and began restructuring discussions with IIB in June.
Pugachyov, who is a Duma deputy, has already agreed to sell some of his assets as part of a deal restructuring 32 billion rubles ($1.02 billion) in IIB's debt to the Central Bank. IIB is the first private bank to default on an external debt issue since Russia's sovereign default of 1998. Market commentators believe its failure to pay is a one-off and does not represent a systemic problem for the sector.
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