Companies struggling to repay US$229 billion of debt in the next 12 months are the “root cause” of the surge in defaults as the global financial crisis and seizure in credit markets exacerbates Russia’s worst slowdown since it defaulted on $40 billion of debt in 1998, according to UniCredit. Oil-drilling company Siberian Services Co. last week became the first Russian borrower to renege on foreign debt this year.

Russian banks are experiencing a 20- percent increase in delinquent debt every month, German Gref, chief executive officer of OAO Sberbank, Russia’s largest bank, said April 8.

Bad loans would probably peak between August and February, when Russian businesses need to repay $109 billion to banks, Botashev said. A bad-loan rate of 20 percent may force the government to inject $15 billion into banks, while a rate of 25 percent would require as much as $40 billion, he added.

“We expect a wave of debt restructuring and bankruptcies in Russia unless large-scale refinancing becomes possible,” Botashev wrote in the note e-mailed Tuesday, adding that as much as 12 percent of all Russian bank debt is already bad.

Source: Bloomberg