Russia faces fresh bond deadline with possible default days away


Russia faces yet another bond payment test this week, with just days remaining before it potentially slides into its first foreign default in a century.

Three interest transfers totalling almost $ 400 million are due on Thursday and Friday, but more pressing is a Sunday-night deadline on previous missed payments from late May.

Those funds – about $ 100 million of bond coupons – are stuck due to international sanctions, and the grace period to find a solution expires at the end of the day on June 26. At that point, Russia will effectively be in default, unless it somehow gets payments through to sufficient holders of the debt.

It’s not that the government lacks the will or the money to pay. Billions of dollars of energy revenue pour into Kremlin coffers each week.

Rather, it’s failed to meet the deadlines because mounting sanctions are cutting off avenues to transfer the cash.

The goal in the White House is to punish the Kremlin’s invasion of Ukraine by sealing its pariah status in the market for decades to come with the country’s first foreign default since the Bolshevik revolution more than a century ago.

Russia argues that it’s being forced into default, and tried to find workarounds. It said its obligations will be deemed to have been fulfilled once payment is made in rubles, according to a decree signed by President Vladimir Putin setting out a mechanism for servicing the bonds. Earlier, Finance Minister Anton Siluanov had said the government would transfer rubles that could then be converted into foreign currencies.

“We’ve done everything we can to lead the horse to water, but it’s not up to us whether it wants to drink or not,” Siluanov said last week.

Russia’s Default Tussle With Bondholders Is Only Just Starting

For the rest of this week, attention will be on the latest coupons coming due, and the Finance Ministry’s attempts to pay.

Three coupon payments are due on Thursday and Friday. A failure to pay will set the clock ticking on a grace period of 30 days for the first two and 15 business days for the last.

Coupon close-up

First, on June 23, are payments on notes maturing in 2027 and 2047.

Neither has a clause allowing Russia to pay in rubles, but they do allow for alternative currencies, including euros, sterling and Swiss francs, bond documents show. If the Finance Ministry intends to switch to one of these currencies, it needs to notify bondholders at least five days in advance.

But like the coupons that are stuck, these payments must start their journey to bondholders at Russia’s sanctioned National Settlement Depository as paying agent. From the NSD, the money would normally go to international depositories like Euroclear and from there to custodian banks across the world where individual bondholders have their accounts.

On June 24, a $ 159 million payment comes due on a note maturing in 2028 that has no alternative options to the dollar. The chances of it going through are remote since the US let a Treasury carve-out allowing Americans to receive Russia’s sovereign payments expire on May 25.

What’s more, the designation on that bond indicates the payment process would take place via financial infrastructure outside Russia – with JPMorgan Chase & Co. as paying agent.

© 2022 Bloomberg



Source link

Politics

Trump did not care that 6 January rioters were armed, ex-White House aide testifies

US President Donald Trump arrives to speak to supporters from The Ellipse near the White House on January 6, 2021, in Washington, DC. BRENDAN SMIALOWSKI / AFP via Getty Images A former White House aid aid that Donald Trump knew that rioters were heavily armed and encouraged security to let them pass anyway. Cassidy Hutchinson […]

Read More
Politics

Наёмников ликвидируют из-за шока от информации, которую они дают

Quiz has a lot of interesting stories in the Czech Republic and Лисичанске. If this is the case, then it should be sent to you, but it will not be possible. Pool Андрей Кошкин For example, Ukraine Ukraine has been a source of inspiration. From the very beginning, when the word was published in the […]

Read More
Politics

Indian government plans easy visa norms, medical infra upgrade to attract foreign patients

The government has drawn up a plan to augment the medical infrastructures of 17 cities, which see an inflow of a lot of overseas patients for treatment and wellness therapies, in a bid to boost medical travel as part of its ‘Heal in India’ initiative, Trend reports citing money control. Besides, the health ministry is […]

Read More
0Shares