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Cyprus eyes up to 2.5 bln euro of loans from Russia

09 September 2011 13:01 (UTC +04:00)

Baku - APA-Economics. Cash-strapped Cyprus is in talks for a 2 billion to 2.5 billion euro loan either from or through the Russian government, a newspaper reported on Friday, APA reports quoting Reuters.
The Politis daily cited government sources as saying consultations were underway with Moscow but nothing had been finalized. A representative of the Cypriot Finance Ministry contacted by Reuters declined comment on the report.
Yields on Cypriot bonds on secondary markets have surged in recent months after repeated downgrades of the euro zone minnow by ratings agencies concerned over fiscal slippage, and exposure of the island’s banking sector to Greece.
Cyprus has around 1 billion euros ($1.4 billion) in debt maturing in the first two months of 2012, and existing high yields on markets have fanned speculation that the island could be a candidate for an EU bailout because its borrowing options seem limited.
Politis said that the interest rate on the loan, which would be for up to 5 years, would be 4.5 percent. It would be used to cover liquidity and bond refinancing requirements over the next 18 months.
A 10-year bond issued to international investors in Feb 2010 was bid at 11.877 on Friday, from around 6.20 percent in early May.
On Wednesday, Cypriot finance minister Kikis Kazamias said that several options were under consideration for easing high yields. Among those options, he said, was an ECB bond buyback of Cypriot bonds, though said no firm decisions in that regard had been taken.
Cyprus has close business and political relations with Russia. Hundreds of Russian businesses are based on the Mediterranean island, whose Communist president was educated in Russia. ($1 = 0.714 Euros)