Moody's rates Vneshtorgbank notes A2

Moody's Investors Service said it assigned an A2 rating to series-9 euro-denominated loan participation notes issued by the Luxembourg-based orphan special purpose vehicle, VTB Capital SA, for the sole purpose of financing a fiduciary deposit with Deutsche Bank Luxembourg SA, which is being made for the sole purpose of financing a senior unsecured loan to Vneshtorgbank of Russia. The outlook is stable.

This issue of series-9 €500 million 4¼% loan participation notes due 2016 is part of VTB Capital's $10 billion medium-term note program. The loan to Vneshtorgbank to be made by Deutsche Bank Luxembourg represents a senior unsecured debt of Vneshtorgbank and ranks pari passu with other unsecured debt.

The ratings are based on Vneshtorgbank's fundamental credit quality and reflect all relevant country risks, the agency said. As Russia's second-largest taker of retail deposits, Vneshtorgbank plays a vital role in the banking system, in the national economy and to some extent on the international scene through various European Union-based subsidiary banks that it acquired from the Central Bank of Russia.

The rating also reflects the probability of a sovereign default implied by the Russian government's low investment-grade 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, S&P said.

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