Closest default of Russia after redeeming a coupon using the ruble

Milan The Russian Finance Ministry said that a foreign bank refused to process public bond payments worth 649.2 million dollar owed on two of its Eurobonds, and that payments were completed on rubles.

Agency reports it Bloomberg It is an event with great potential, because Exposes the country to technical default In light of rating agencies.

Russia knows this well and has, in fact, specified, through a Kremlin spokesman – Dmitry Peskov – that it may be in a virtual state, but that this will be artificial conditionA company spokesman said: There are no real reasons for default ReutersHe added that Russia has all the money it needs to meet its obligations, but will continue to pay off its foreign debt in rubles as long as its foreign exchange reserves are frozen due to Western sanctions.

In this case, according to Mosca, payments in US dollars were sent, in connection with obligations on dollar-denominated Eurobonds, with maturities scheduled for this month and in April 2042, but were rejected. As a result, “a Russian financial institution had to be hired to make the necessary payments.” Then the payments were made in the currency of the Russian Federation.

The dynamic, given that the batch goes back to April 4, seems to be one A direct consequence of the judgment that the US Treasury It was issued on the same day that the Moscow government banned the payment of bonds using current accounts in US banks.

The US pushes Russia into default: stop payments through US banks

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by Carlotta Scuzzari

On March 15, Fitch released the A . ratings document in which he specified, in accordance with his judgment criteria, any payments in local currency for coupons of international bonds denominated in dollars (worthy in those days) would have constituted an event of sovereign default at the end of the 30-day grace period. after Initial delayMoscow informedpush success. On March 25, Fitch withdrew its rating from Russia for European sanctions. Standard & Poor’s also announced that it would withdraw its ratings, on both Russian and sovereign entities, by April 15.

Rating Agency Environment Resources Point out that it is necessary to consider not only the expected currency of payments from the legal documents of the bond, but also the actual ability of the issuer to reach investors with the flow of funds. A process that, given the limitations of Moscow’s operations in financial markets, is not an imposed result. So the technical default is triggered: If payment in local currency rather than in dollars is not foreseen by all contractual documents governing the issuance; Or if the investors are unable to receive the payment. It is therefore necessary to have a full analysis of the documents, and the end of the grace period (30 days), before arriving for a default judgment.

As they often mention Bloomberg that financial timesHowever, this will not be the case with cases providing for the possibility of switching to payment in rubles in the event that it is impossible to pay in dollars or euros, as stipulated in some footnotes to contracts. So it will only remain to wait for the event grace period to expire. According to reports from the Moscow Ministry, the foreign bank, whose name has not been disclosed (in the past, the role of the bank responsible for processing these payments was set by JP Morgan), refused to order Russia to pay its bonds and did not even process the payment of the face value of the Eurobonds due this year.

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The ministry added that Russia may consider allowing holders of Eurobonds for 2022 and 2042 to convert ruble payments into foreign currencies once Russia returns to its foreign currency accounts. The same Reuters that lRussia’s ability to meet its debt obligations has come into the spotlight after sweeping Western sanctions on Ukraine’s “special military operation” have frozen nearly half of the country’s state reserves and restricted Moscow’s access to global payment systems.


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