Moody's rates Vneshtorgbank notes A2

Moody's Investors Service said it assigned an A2 rating with stable outlook to the forthcoming series 8 loan participation notes to be issued by special purpose vehicle VTB Capital SA for the sole purpose of financing a fiduciary deposit with Deutsche Bank Luxemburg SA, which is being made for the sole purpose of financing a senior unsecured loan to Russia's Vneshtorgbank.

The amount of the issue is expected to be $1 billion with a maturity of 21 months. The loan to Vneshtorgbank represents an unsecured debt of Vneshtorgbank and ranks pari passu with other unsecured debts.

Moody's said the rating incorporates Vneshtorgbank's fundamental credit quality, which is reflected in the global local currency rating and includes all relevant country risks. As the country's second-largest taker of retail deposits, VTB plays a key role in the banking system, in the national economy and to some extent on the international scene through various European Union-based subsidiary banks it will acquire from the Central Bank of Russia.

The rating also reflects the probability of a sovereign default implied by the Russian government's Baa2 foreign currency bond rating and the likelihood that the Russian government could impose a debt moratorium in the event of default on its own foreign currency obligations, the agency said.

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