EXCLUSIVE: S&P’s junk grade for Russia no bombshell – Swiss banker

By Andrei Skvarsky. A Moscow-based senior manager at Swiss bank Lombard Odier has argued that ratings agency S&P’s lowering of the sovereign credit rating  of Russia to below investment grade late last month has made little difference to the country’s investment landscape.

Mainstream investors have gradually been reducing their Russian business for about a year anyway, while niche investors with stronger risk appetites will take little notice of sovereign credit ratings, Stephane Ulcakar, senior vice-president of Geneva-headquartered lender Lombard Odier and the latter’s representative in Moscow, argued in an interview with EmergingMarkets.me.

Most investors active in the Russian market have moderate risk appetites and started to scale down their exposure when the economic crisis broke out in the country around a year ago, Ulcakar explained.

Besides, they tend to prefer debt issued by large Russian companies, but this type of debt has become scarcer on the market as some of those firms came under Ukraine-related Western sanctions a few months ago, he said.

On the other hand, niche investors looking for high yields are less sensitive to S&P ratings. Some of them might even feel that today is the right time to buy Russian assets that are relatively cheap as a combined effect of the Russian economic crisis and low global oil prices, Ulcakar said.

“The real acid test will be the ability of Russian companies to repay their foreign currency-denominated debt in the following months – especially for the non-state-owned ones who are less likely to benefit from government support,” he said.

Lombard Odier has offices in several European countries, Russia, Canada, Bermuda, Asia and the Middle East in addition to its headquarters in Geneva. The 230-year-old firm is the oldest private bank in Geneva and one of the largest private banks in Europe.

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