The Russian rouble is collapsing, falling over 8% in Monday trading before staging a modest rebound. And this is terrible news for Russian corporates, which are due to make $35 billion of debt repayments in December.
At the time of writing, the currency had fallen to over 53 roubles to the dollar:
Below is Morgan Stanley's chart of the debt repayment schedule. As you can see, falls in the rouble over recent months have not been too much of a problem for Russian companies as debt repayments have been relatively modest.
That is now about to be tested:
Timothy Ash of Standard Bank says Russian corporates will be feeling the pinch:
"I guess the CBR thinks that with USD420bn in FX reserves, it has plenty of ammo still to deal with those after the event. FX debt liabilities are around USD680bn gross, of which around USD130-150bn fall due over the next year. I would think that many entities will be struggling with debt service costs on FX loans at these levels for the rouble."
Compounding the problem, the Russian central bank has limited currency repo operations - whereby Russian banks can access the central banks dollar reserves in exchange for collateral. This is widely seen as a response to the events of 2008 where Russian banks used cheap dollar liquidity provided by the central bank to short the rouble, compounding the currency's problems.
However, companies still have to find the money to fund the almost 1.9 trillion rouble bill (up from 1.6 trillion only a month ago) even with limited access to central bank funding. Perhaps this helps explain the announcement on Monday that the Russian government has decided to sell a 19.5% stake in the country's largest oil company, Rosneft.
The question now is at what price investors will be willing to take a risk on Russian firms - and how low the rouble can go.