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15 Apr, 2022
Moody’s warns of Russian default
The rating agency views payment on dollar bonds in rubles as nonpayment

US credit rating agency Moody’s has raised a red flag over Russia’s sovereign debt, saying the nation may face its first major default on foreign bonds since the years following the Bolshevik Revolution of 1917.

The warning comes days after Russia made a payment on two sovereign bonds, maturing in 2022 and 2042, in rubles rather than dollars as mandated by the terms of the securities. This was after the US blocked attempts by Russia to pay the debt in dollars held in American bank accounts.

Russia “therefore may be considered [in] default under Moody’s definition if not cured by 4 May, which is the end of the grace period,” the New York-based agency said in a statement released on Thursday.

“The bond contracts have no provision for repayment in any other currency other than dollars.”

The firm said that while some Russian Eurobonds issued after 2018 allow payments in rubles under certain conditions, those issued before 2018, including those maturing in 2022 and 2042, do not allow it.

“Moody’s view is that investors did not obtain the foreign-currency contractual promise on the payment due date,” Moody’s said.

Earlier this month, the US Treasury stopped Russia from paying holders of its sovereign debt more than $600 million from reserves held in US bank accounts, saying that Moscow had to choose between draining its dollar reserves and default.

Freezing nearly half of the foreign currency reserves was part of the Western sanctions imposed on Moscow over its military operation in Ukraine. The Kremlin has repeatedly dismissed the notion of default, saying the country has the funds and is willing to pay its debt. Moscow has instead described the blocking of payments as a default by the West on its financial obligations to Russia.

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12 Apr, 2022 16:20

Russia responds to CNN’s default claim

The media outlet’s report is clearly false, finance ministry says

A report by US media company CNN about an alleged Russian Eurobond default announcement is not true, the Russian Ministry of Finance said on Tuesday.

CNN reported Monday, citing credit-ratings agency S&P, that Moscow has defaulted on its foreign debt because it offered bondholders payments in rubles and not in dollars.

“Information posted by CNN does not correspond to the facts,” the ministry’s statement said, adding “Russia did not announce the default on its Eurobond commitments.”

“Default means the debtor either has no money to honor his debt liabilities or no desire to honor such liabilities when funds are available. Neither of the two is the case in respect of Russia. The Russian Federation has enough funds to timely service and repay all its debt liabilities,” the finance ministry explained.

The ministry stressed that Washington’s actions to block Moscow’s payments have prejudiced the interests of foreign investors.

The hurdles to make payments, service and repay the Russian sovereign debt in foreign currency were created artificially, while the restriction for the Russian public-debt servicing can be viewed as the next default of foreign counterparties on their contractual obligations, the ministry said.

“All the possible claims of creditors related to this situation should be readdressed to the authorities of those states that unlawfully created obstacles to Russia’s fulfillment of its debt obligations,” it added.

The Ministry of Finance had also said earlier that the country would do everything possible to make sure its creditors are paid. Russia will take legal action if the West tries to create an artificial default in the country, Izvestia newspaper quoted Minister of Finance Anton Siluanov as saying on Monday.