Russia’s default was predicted by Bloomberg within hours. The grace period for missed payments on bonds worth about $ 100 million, blocked due to widespread sanctions over the war in Ukraine, ends tonight. If investors do not receive their money by Monday morning, there will be a “default” case, Bloomberg said, citing documents.
For Russia, this will be the first external default since the Bolshevik rejection in 1918. At the beginning of this year, the country was very close to such a moment, but managed to save himself with all his might by changing the method of payment, reminds BGNES. This alternative was blocked in May, just days before the $ 100 million maturity date, when the United States closed the sanctions door that allowed American investors to receive payments on government bonds.
Now the question is what will happen next, as markets face the unique scenario of a defaulting borrower who is willing and able to pay but cannot.
Usually the big rating agencies are the ones that have to default, but the sanctions forbid them to work with Russia. Bondholders could come together and make their own statement, but may prefer to wait for the war in Ukraine and the level of sanctions until they try to figure out what the chances are of getting their money back, or at least some of it.
“The declaration of bankruptcy is a symbolic event,” said Takahide Kiuchi, an economist at the Nomura Research Institute in Tokyo. “The Russian government has already lost the ability to issue dollar-denominated debt. Russia cannot borrow from most foreign countries,” he added.
As sanctions imposed on Russian authorities, banks and individuals increasingly cut off payment routes, Russia says it has met its obligations to creditors by transferring payments in May to a local paying agent, although investors do not have the funds. in their own accounts.
Earlier this week, she made other transfers in rubles, although the bonds in question do not allow this payment option. The Minister of Finance Anton Siluanov referred to “force majeure circumstances” as an excuse for the change of currency, calling the situation a “farce”. According to lawyers who spoke to Bloomberg earlier this month, the legal argument for force majeure has historically not covered sanctions. “There is every reason to believe that in the case of artificially preventing the Russian Federation from servicing its external sovereign debt, the goal is to apply the label ‘default,'” Siluanov said on Thursday. “Anyone can say whatever they want and can try to put such a label on. But anyone who understands the situation knows that this is by no means a default,” he had said.
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