The Ministry of Finance of Russia assured this Thursday that his country has satisfied the payment of $117 million in interest on two coupons eurobondswhose non-payment meant that the country fell into suspension of payments (‘default’).
The sanctions for the invasion of Ukraine have isolated Russia from the global financial system and locked up most of its gold and foreign exchange reserves. The payment of the two Eurobonds, which was due this Wednesday, is Moscow’s first test to meet its external debt obligations since the West imposed sanctions.
The Kremlin spokesman, Dmitry Peskov, assured this Thursday that “Russia has all the necessary means and the potential not to take the situation to a suspension of payments.” “Any suspension of payments that could hypothetically occur would have exclusively contrived character“, he added.
Doubts about the solvency of Moscow
Doubts about Moscow’s solvency intensified the day before when the Ministry of Finance proposed to satisfy the interest payment in rubles if the payment in dollars did not reach foreign bondholders, something that the credit rating agency Fitch said would constitute a default. sovereign, if not corrected within a 30-day grace period.
Russia has 15 international bonds with a face value of about $40 billion outstanding, about half of them held by international investors.
The coupon payments due March 16 are the first of several, with another $615 million due during the rest of the month. The first return of principal is on April 4, when a $2 billion bond matures.
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The debt sold after Russia was sanctioned for its annexation of Crimea in 2014 contains a provision to alternative currency payments. For bonds trading after 2018, the ruble appears as an alternative currency option.
Last week, Fitch Ratings downgraded the solvency note as the long-term issuer of Russia’s sovereign debt to ‘C’ from ‘B’ as a reflection of the “imminent” risk of default, after the Russian government approved a decree on March 5 that could potentially force a redenomination of payments sovereign debt in foreign currency to local currency for creditors in specific countries.