Russia is in default, says Committee

A panel of investors has determined Russia triggered a credit event after it defaulted on nearly $1.9 million in interest on a sovereign bond, approaching its first major foreign debt default in more than a century.

The Credit Derivatives Determinations Committee for Europe, the Middle East and Africa (CDDC) mentioned on its website that it voted yes on a question about whether a credit default event occurred with respect to Russia.

Russia’s 2022 international bond matured on April 4 and payment of principal and interest due at maturity was not made until May 2.

Holders of that Russian sovereign bond abroad were seeking a decision on whether $1.9 million in potential interest accrued during that period, which was not included in the payment, constituted a credit event that allowed them to collect default insurance.

The committee, made up of 14 members including Citibank, Bank of America, Deutsche Bank, Elliot Management and PIMCO, agreed that the non-payment occurred on May 19 and that on May 26 a resolution request, known as as a credit default swap (CDS).

The Committee will meet again on June 6 with the aim of continuing the process, which would establish an auction to determine the payment of the CDS.

There is currently $2.54bn of net notional CDS related to Russia, including $1.68bn on the country itself and the rest on the CDX.EM index.

Russian dollar-denominated bonds traded up 1 cent to 2.5 cents yesterday, according to Refinitiv data. They are in dangerous territory, ranging from 30 cents to a low of 19 cents.

A Russian default on other debts seems inevitable after the US Treasury decided in late May not to extend a license allowing creditors to receive payments from Russia despite financial sanctions.

Russia has about $40 billion in outstanding international bonds and about $2 billion in payments through the end of the year.

Russian Finance Minister Anton Siluanov has said he will service its foreign debt in rubles if the United States blocks other options. However, not all bonuses allow payment in rubles.

prepares for embargo

Faced with the decision of the European Union to seize two thirds of Russian oil, the Kremlin claimed to be taking measures to minimize the impact.

These sanctions will have a negative impact for Europe, for us and for the world energy market as a whole. But there is a reorientation of the economy that will allow us to minimize the negative consequences, “said Dmitri Peskov, spokesman for the Kremlin, without giving more details about it.

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