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Raiffeisen Bank International on Wednesday abandoned a planned sale of risky bank debt after a “negative market reaction” to a report that the United States was putting pressure on the Austrian group over a deal with Russian oligarch Oleg Deripaska.
The Bank of Vienna has been selling €650 million worth of “extra tier one” bonds, a class of debt designed to withstand losses when institutions run into trouble, and has received more than €1.6 billion in demand from investors.
But hours before the bonds were scheduled to be priced, Raiffeisen withdrew the offer, citing “negative market reaction to the latest headlines.”
The company pointed to a Reuters article that said Washington was pressuring the bank to drop a complex and controversial 1.5 billion euro asset swap deal with Deripaska. The deal would allow the bank to repatriate profits from Russia.
The United States raised concerns about the Austrian bank's dealings with the Russian businessman, who was subjected to sanctions after the Russian invasion of Ukraine.
The Reserve Bank of India was offering investors an 8.5 per cent yield on the deal, which was scheduled to mature in December 2029 and is earmarked for repayment of existing AT1 bonds.
Strong demand for Raiffeisen AT1 bonds underscored the strength of the AT1 market almost a year after investor confidence was shaken by the collapse of Swiss bank Credit Suisse. Regulators allowed $17 billion in Credit Suisse bonds to be erased, while shareholders received small compensation. In general, AT1 bonds are thought to rank ahead of equity on the balance sheet.
RBI's existing AT1 bond prices fell slightly on Wednesday, while the bank's shares closed 8.7 per cent lower.
Raiffeisen is the largest European bank remaining in Russia and has made huge profits from its operations since the war in Ukraine began in 2022. Last year almost half of the bank's €2.1 billion profits came from its Russian division, up from about a third before the war. war. But the Kremlin's imposition of capital controls meant the Reserve Bank of India was unable to repatriate its profits.
Under the agreement with Deripaska, Raiffeisen's Russian subsidiary will pay cash to Deripaska for his 28 percent stake in Austrian company Strabag, one of Europe's largest construction companies.
Reuters reported that US authorities were on the verge of dismantling the complex deal. The deal will require the subsidiary to obtain special approval from the Kremlin.
The Reserve Bank of India, which described the Reuters story as “rumours”, said it had “seriously verified the compliance of the Strabag deal with all applicable sanctions”.
It added that it would not go ahead with any deal that violates sanctions or exposes the Reserve Bank of India to the risk of violating sanctions.
Raiffeisen, which had previously explored complex asset swaps with Russian entities under sanctions, has come under increasing pressure to reduce its Russian operations but has resisted, insisting that doing so would hurt shareholders.
The Financial Times reported in March last year that the Reserve Bank of India had begun working on a potential €400 million deal with Sberbank's frozen European holdings, until the state-owned bank sold the assets to another party.
