Moody’s says Russia defaulted on its debt

Blocked interest payments on Russian debt constitute a default situation, estimated the rating agency moody’s in a statement published on its website in the early hours of this Tuesday.

“On June 27, Russian debt holders had not received coupon payments for two Eurobonds worth $100 million by the expiration of the 30-calendar-day grace period, which we consider to be a default situation according to our definition”, explained the rating agency.

This situation does not imply a legal default status for Russia because the rating agencies can no longer rate that country due to the international sanctions imposed against Moscow by the invasion of Ukraine.

Now it is up to a committee of creditors, the Credit Derivatives Determination Committee (CDDC), to assess whether or not Russia defaults on payments. As it has not yet ruled on the matter, the situation remains unclear.

Russia had to pay 100 million dollars in interest on its debt on May 27, an installment with a one-month grace period that expired on Sunday.

The Russian Finance Ministry claimed to have paid the money in foreign currency as early as May 20. But he admitted on Monday that the money had not reached creditors, because banking intermediaries blocked payments due to sanctions imposed by Western countries as a result of the war in Ukraine.

Russia assured on Monday that “the non-obtaining of the money by the investors is not the result of the fact that there has not been a payment, but is caused by the action of third parties, something that is not directly considered. […] as a case of non-payment”.

The United States has prohibited Moscow from paying its debts in dollars since the end of May.

However, some European bonds, issued before 2018, “do not contain a clause” allowing Russia to “repay them in rubles,” Moody’s said in its statement.

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