Russian banker: European companies in trouble

French and European companies that have taken out loans with Russian banks and wish to sever their relationship with these lenders are at an impasse. Indeed, the situation is becoming increasingly complicated as sanctions are imposed in connection with the war in Ukraine. Here's an overview of their difficulties with bankers.

Repayment difficulties

The outbreak of war in Ukraine is complicating the situation for European companies that had previously taken out loans with Russian banks. Bloomberg estimates the value of these loans at $22 billion.

In practice, these companies have limited options: turn to a non-Russian lender or repay their loans. However, some companies have managed to do just that, including Veon. In March, the Dutch telecommunications company declared that it had prepaid a loan of 30 billion Russian rubles, or almost $224 million, to Russian creditor VTB Bank. Veon also decided to terminate the banking facility in order to comply with the sanctions applicable in Russia.

Not all European companies operating in Russia have sufficient financial capacity to repay their loans. They therefore have no choice but to turn to another lender. Problem: most European banks have left the country. Only Raiffeisen and UniCredit remain. However, these institutions are no longer granting new financing. The only way out is to turn to a regional bank such as Metalinvestbank or MTS, although the latter have weaker capacities.

Cost of credit up sharply

In addition to the risk of sanctions, foreign companies in Russia face an explosion in the cost of credit. Since the start of the war, the Central Bank of Russia has raised rates from 9.5% to 17%. Aware that sanctions are likely to tighten further in the coming months, many companies are anticipating the situation by restructuring lines to contain their repayment burden.

" We make their maturity evolve, and adjust repayments to the end of the loan," explains a financing manager in the "Ukraine" group of the Association française des trésoriers d'entreprise (AFTE) to Les Echos newspaper.

For their part, Russian banks, which initially sought to increase their lending capacity to European companies as an incentive to keep their operations in the country, no longer have much choice. Some have even decided to stop granting loans to companies " belonging to an unfriendly country ".

Finally, the situation is also affecting new credit lines, which are still pending. Companies faced with the withdrawal of their European bank should turn to a Russian bank, taking care to check which activities are covered by sanctions.