Debt Service: Evidence Based on Consolidated Statements of Russian Companies

Burova A., Koshelev D., Makhankova N.

We feature a modification of the debt service ratio by expanding the debt service concept and breaking down debt service and debt by currency and using consolidated data. Our debt service analysis also considers the company’s ability to meet its current liabilities with cash and funds borrowed under credit lines.

Our sectoral analysis of Russian companies highlights companies of particular concern. These are machinery firms and, given the foreign currency factor, oil and gas companies and firms in metals, mining and chemicals and agriculture (although companies hedge their foreign currency risks with cross-currency and interest rate swaps).

Credit lines may be a source of funds to meet current liabilities. A simulation of a 25% revenue shock shows a significant increase in the debt service ratio in machinery, construction and real estate, and energy. The use of credit lines concurrently with the emergence of this shock brings financial stability risks for the broader economy.

Debt Service: Evidence Based on Consolidated Statements of Russian Companies