EAST EUROPEAN DEBT

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP83T00966R000100020031-5
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 13
• Document Creation Date: December 20, 2016
• Document Release Date: April 12, 2007
• Sequence Number: 31
• Publication Date: March 3, 1982
• Content Type: REPORT

\./:
-David Luft, Policy Plan 1 Staff
?W~ .
' 73] 2 I ~ State
i?~ ss"s?0' 241
_ _
.:. _..~_~ .,.~. ~~..~~ ;.;~ ~" ~~ f~Q71~4/~~:CaP$3TOa96~R00010Q0
 A proved For Release 2007/04112 :CIA-RDP83T00966R000100020031-5
MEMORANDUM FOR:
Henry Rowers,
FYI -- Two very interesting papers
on East European Debt by a friend who
runs a consulting firm.
LL`L j /
Date March 3, 1982
FORM USE PREVIOUS '
~~~ ~?b7~?I~elease 2007104!12 :CIA-RDP83T0096~~0~~8~000ZOQ31-5
 ?
THE RQM~>NIA RESTRUCTIiitING--INTELLIGENCE REPORT
Several U.S. cummarctal bankers ar~~ mt~eting today, March
1st, in New York to discuss the "proposed restructuring
arrangement" which is being fashioned between Romania and its
eurobanking creditors.
Last week the nine most heavily committed banks "bought"
the proposed arrangement. This group of banks from Germany,
England, Switzerland, a-7d France includes two American
banks--Manufacturers Hanover with $80 million of unguaranteed
exposure and Bank of America with $40 million of unguaranteed
exposure. .The plan presented to these banks has been worked
out earlier last week in Bucharest by a commercial banker who
has informally been serving as an adviser to the Romanians.
This banker, Lee KJr?ilecen of Manufacturers Hanover, has,
sought to devise a scheme which will be acceptable to bankers
given the present climate. Most bankers recognize. that there
is a strong likelihood that Yugoslavia, Hungary, and East
Germany are likely to follow suit.
The scheme which apparently the nine most exposed banks
have agreed to accept involves rescheduling 80 percent of the
total $2.8 billion of unguaranteed'commerclal bank debt. The
payment period calls for a three year grace period and six
and one-half years of payback. The proposed fee structure is
1.75 percent over LIBO plus a generous one percent front end
Approved For Release 2007/04112 :CIA-RDP83T00966R000100020031-5
 Approved For Release 2007/04112 :CIA-RDP83T00966R000100020031-5
fee for agreeing to the rescl7rdul trrg. The plan is to get the
entire commu.nfty of 312 banks to agree. to the plan so that a
signing can occur in May.
The 1b-banks to hear the proposals today have
collectively $415 mllllon of ;~ngaranteed credits to Romania.
Manufacturers Hanover Bank ar~d Bank of America have nearly 30
percent of the total. The smallest three of the 16 banks.
have hardly any exposure whatsoever.
In effect, this restructuring is quite similar to the
plan that is evolving for Poland. We understand that in the
Polish case 95 percent of the ungaranteed bank debt is to be
restructured. There will be a longer repayment period for
Poland (effectively eight years).
In our judgment, the banks go along because they don't
really see an alternative on the horizon. At least they get
large front end fees which will boost this year's income
together with agreements on the part of the borrower to
remain current on interest charges and to continue
cooperating with creditors in the future according to
established rules of the game. It iafll be interesting to see
how the bank regulators choose to classify these assets
during the next round of examinations.
 Approved For Release 2007/04112 :CIA-RDP83T00966R000100020031-5
THE POLISK OEf}T SITUATION--INTELt_ICE? NENORANDUM
Perceptions of American Bankers
February 10, 1992
We talked this week with four U.S.-based eurobankers
regarding the Polish debt situation. These are the views
expressed by these senior lending officers and credit policy
executives who asked not to be Identified.
Everyone agrees that the situation is exceedingly.
complex largely because of the diversity of views and
aspirations among the interested parties. The Lssue is not
so rnuch repayment of the debt, but the wide range of interest
in the particular situation.
1. According to the U.S. bankers, the German banks want
a quiet, "no fanfare" solution which will result_in a
stretching out of the debt Into the future. The Germans
recognize that the Poles certainly are unable to pay interest
or principal now acrd are prepared to accept a lengthy
stretch-out of payment terms--8 to 10 years.
2. The German Government also does not ~yant to rock the
boat for fear of jeopardizing the pipeline project.
3. The U.S. bankers would seem to be much more
hard-nosed. They realize that without the imposition of
substantial terms and condiaions accompanyirfg the
stretch-out, there can be a vecy harmful precedent set in the
 Approved For Rel~se 2007/04112 :CIA-RDP83T00966R~ 100020031-5
-2-
Polish situat Ion. They Corp inirc to speak of the f?1 icaragua
restructuring which Is uniformly regarded ~~s a fiasco from
the commercial bankers' persoectlve. Poland could turn Lnto
a large scale Nicaragua which could then l;vse much more
serious problems as other countriE~s follow suit. There is an
article In this week's Eusiness 1Yeek which suggests .that the
American banks are displeased with the U.S.'Government's
assumption of the arrearages on the commodity credits. When
questioned about th1.,, I have been told that on the one hand
the banks are pleased to see that the U.S. Government may
provide a safety net In deteriorating situations yet they see
the present "solution" as undermining a long established
pracrlce in which a country Ls first declared in default
prior to settll~ment under the guarantee programs. The U.S.
bankers are upset with the government's step in that they
don't think the solution is in any sense permanent. .This
buying of time can only weaken the position of the U.S. banks
vis-a-vis the European lenders with much larger Polish
exposure. Also, the government stepping in this way will
set a precedent which will make steering committee meetings,-
more difficult in the future. T-here Is, however, a diversity
of views and almost an ambivalence on the part of individual
bankers regarding t#;~ prospect of a Polish, default. The four
 Approved For Release 2007/04112 :CIA-RDP83T00966R000100020031-5
?
bankers interviewed seemed to become we