Corporate restructured debt in Russia has reached 14.4 trillion rubles and continues to grow. The key drivers are the Central Bank’s high key rate, weak demand, and logistical challenges. Andrey Goncharenko, Deputy General Director of PSK-Solutions, explains which sectors will be hit hardest and what businesses should do.

The Perfect Storm

Over the past two years, the Central Bank has systematically tightened monetary policy, with the key rate peaking at 21% and remaining at elevated levels for half a year before gradually declining. Many large businesses treated the high rates as a temporary measure, expecting a quick reversal—some borrowed at floating rates, others took loans for capital-intensive projects, while some relied on working capital loans that became prohibitively expensive.

But reality has set in: very few companies have EBITDA margins that can cover current interest rates. For months, high borrowing costs and the need to maintain production have eroded corporate “safety cushions.” As a result, many businesses can no longer service their debt.

According to Bank of Russia data, the volume of restructured corporate loans (excluding SMEs) surged by 30% YoY, reaching 14.4 trillion rubles by January 1, 2025—19.2% of the total loan portfolio. The first quarter of 2025 brought no relief, with weak earnings reports across multiple sectors and restructured debt surpassing 15 trillion rubles, now accounting for 20% of the portfolio.

Banks are cautiously acknowledging the trend, noting a rise in restructuring requests. While lenders—accustomed to record profits in recent years—will face higher provisioning costs due to loan reclassification, they have little choice but to negotiate with borrowers. The terms of these negotiations will be critical.

The situation is especially complex for companies with multiple bank creditors and public bondholders. In such cases, maintaining parity among creditors is a major challenge.

Hardest-Hit Sectors

Past crises saw banks compiling internal “stop lists” of high-risk industries—for example, real estate in 2014, which suffered from dollar-denominated debt. Today, banks are silent, suggesting widespread distress across multiple sectors. However, some industries are already struggling with liquidity crises:

1. Retail (Non-Essential Goods) – Companies specializing in imported cars, electronics, and other non-essential items face plummeting demand as consumers defer purchases in favor of high-yield deposits.

2. Coal Mining – Hit by high borrowing costs, unfavorable coal prices, and costly logistics due to export market shifts. The government is already drafting a bailout plan given the sector’s social and economic importance.

3. Metals & Mining – Highly leveraged firms that expanded or modernized but have yet to see returns are at risk.

4. Exporters – A strong ruble, volatile commodity prices, trade wars, and geopolitical uncertainty add further pressure.

Navigating the Crisis

Many business owners still hope for external fixes—a rate cut or rebounding export prices. But the crisis has deepened, and survival will require proactive measures.

Current Best Practices:

• Cost-cutting – Layoffs, non-core asset sales (even at a discount).

• Debt Restructuring – Early engagement with banks is key. Companies that present viable recovery plans are more likely to secure favorable terms.

Possible Restructuring Terms:

• Payment holidays – Temporary relief while banks assess repayment capacity.

• Debt-to-equity swaps – Less likely, as banks prefer to avoid non-core assets, but possible in some cases.

Government Support?
Expect targeted measures—tax breaks, tariff relief, or state guarantees—rather than broad bailouts. Sectors like defense, energy, and agriculture may receive aid, but many will have to weather the storm alone.

Action Plan for Businesses Facing Debt Problems

1. Financial Health Check

   • Conduct stress tests.

   • Assess liquidity, debt structure, and repayment schedules.

   • Build financial models under multiple scenarios.

   • Prepare a 6–12-month cash flow forecast.

2. Cost Optimization

   • Slash non-essential spending.

   • Consider layoffs and operational consolidation.

   • Sell non-core assets, even at a discount.

   • Renegotiate supplier contracts.

3. Restructuring Decision

   • Identify the breaking point for debt servicing.

   • Prepare a restructuring proposal before default.

4. Creditor Negotiations

   • Present a clear repayment roadmap.

   • Offer solutions: maturity extensions, grace periods, adjusted payment schedules.

   • Highlight owner commitments (e.g., capital injections).

5. Finalizing Agreements

   • Formalize new terms in amended contracts.

   • Ensure transparency with creditors via regular reporting.

6. Post-Restructuring Strategy

   • Stabilize operations.

   • Plan for gradual reinvestment and growth.

   • Explore alternative funding (bonds, private investors).

Conclusion

The crisis will reshape corporate Russia. Companies that act decisively—cutting costs, restructuring debt early, and maintaining creditor trust—will survive. Those waiting for a miracle may not.

Author: Andrey Goncharenko, Deputy General Director, PSK-Solutions.
Originally published in M&A News Telegram channel.
RBC, August 4, 2025.

This article has been translated to English by PSK-Solutions LLC. The original version in Russian is available here.

This is an unofficial translation provided for informational purposes only. All rights to the original content belong to the original author(s), and no copyright infringement is intended. While we strive for accuracy, slight discrepancies may occur in the translated version.