Already next week 66 million dollars have to be repaid to the creditors. A total of 615 million dollars are still due in March. Then, on April 4, a bond worth two billion dollars has to be repaid.
The country, hit by tough Western sanctions after Ukraine’s invasion, confirmed paying $117 million in interest on two foreign-currency bonds on Friday, averting a bankruptcy for the time being. The Treasury said the country had fully met its commitments. Insiders confirmed to Reuters news agency that the funds are on their way to creditors. Some European investors said they had already received the dollar monies due. Two creditors in Taiwan said the funds were being transferred. “Payment for both coupons has been made,” a person familiar with the situation told Reuters.
Had there not been a transfer, it would have been the first default since the Russian Revolution of 1917, when the Bolsheviks refused to recognize Tsarist-era debts. Russian foreign currency bonds with a total volume of around 40 billion dollars are currently in circulation. Around half of these are held by foreign investors.
News of the payment caused Russian bond prices to rise. That for a bond maturing in 2043 climbed to 45 cents on the dollar. Although trading volumes were low, the price has risen significantly since the record low of 12 cents hit on March 8, according to financial data provider Refinitiv.
Future payments could get complicated. For example, some of the paper issued in dollars will have a clause allowing payment in alternative currencies such as euros, pounds, Swiss francs and the Russian ruble. This is because bonds issued after 2014, and thus after the annexation of Crimea, contain a provision for payments in alternative currencies. For bonds sold after 2018, the ruble is listed as an alternative currency option. However, the currency has lost massively in value since the outbreak of war.
Several rating agencies had recently pushed their rating for Russia’s creditworthiness deep into the junk area. However, the International Monetary Fund (IMF) considers serious consequences for the global financial system in the event of a state bankruptcy in Russia to be unlikely.
Source: Nachrichten
