Russian Railways to sell its 62-storey skyscraper in the centre of Moscow to enable it to repay part of the debt of 50 billion euros, the Russian government has given, three sources told Reuters.

According to the report, the Russian government is discussing ways to support Russia’s largest commercial employer.

State-owned Russian Railways, a monopoly in the sector, employs about 700,000 people and has suffered a decline in revenue amid a sharp slowdown in Russia’s war-torn economy, while debt costs have soared due to the highest interest rates in two decades.

The sale was discussed at a government meeting

The option of selling the stunning “Moscow Towers”, part of Manhattan-style Moscow City, was discussed at a government meeting last week, a source with knowledge of the talks told Reuters on condition of anonymity because of the sensitivity of the situation.

A decision was made that Russian Railways would have to sell the skyscraper to pay off some of its debt and avoid significant increases in freight rates, three sources told Reuters.

One of them said the company had been instructed to sell the building for no less than the 2024 purchase price, which Russian newspapers Kommersant, Vedomosti and RBC reported was 193.1 billion rubles ($2.42 billion).

The company and the government did not respond to requests for comment.

A sale could help reduce some of Russian Railways’ debt if they can find a buyer amid a significant slowdown in the Russian economy, which is expected to grow 1.0% this year, down from 4.3% in 2024.

No decision has been taken on other measures discussed earlier, such as raising freight rates, debt restructuring, state subsidies and reducing or postponing tax payments, one of the sources said.

The option of converting some of the bank debt into equity is still on the table, the source added.

Creditors reject proposal to convert debt into shares

Russian Railways, the Finance Ministry and the Central Bank should discuss the possibility of conversion for up to three years with a buyback option based on financial guarantees provided by the Finance Ministry, the source said.

Andrei Kostin, managing director of VTB bank, the largest lender to Russian Railways, told Reuters that creditors had rejected a proposal to convert 400 billion rubles of debt into shares.

Moscow City is a cluster of skyscrapers on the banks of the Moskva River that houses major Russian companies, including VTB Bank, as well as government ministries.

Russian Railways had planned to move its headquarters to the skyscraper and cover the purchase price by selling other office properties in Moscow, but that never happened.