Russia in ‘default’ credit event, says committee of investors

A woman holds Russian ruble banknotes in this illustration taken May 30, 2022. REUTERS/Dado Ruvic/Illustration

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NEW YORK/LONDON, June 1 (Reuters) – An investor panel determined on Wednesday that Russia triggered a credit event after it failed to pay nearly $1.9 million in interest on a sovereign bond, bringing thus the country of its first major external market. non-payment for more than a century.

EMEA’s Credit Derivatives Determinations Committee (CDDC) said on its website that the committee had voted “yes” to a question to determine whether a “credit default event” had occurred. as far as Russia is concerned.

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

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Foreign holders of this Russian sovereign bond have requested a ruling on whether $1.9 million of potential interest accrued during this period, which was not included in the payment, constituted a ” credit” that could allow them to collect payment on default insurance known as credit default exchanges.

The committee said it would continue to discuss the matter on Monday, June 6.

A Russian default on other debts appears inevitable, some investors say, after the US Treasury opted in late May not to extend a license that had allowed creditors to receive payments from Russia despite financial sanctions.

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

The sweeping sanctions imposed by Western countries and their allies on Russia after its February 24 invasion of Ukraine, along with Moscow’s countermeasures, have virtually shut the country out of the global financial system.

Russian Finance Minister Anton Siluanov said on May 18 that Moscow will service its foreign debt in rubles if the United States blocks other options and will not default because it has the means to pay. However, not all bonds allow payment in rubles.

The country has said it could expand a system used for its gas payments to sovereign bondholders, allowing Eurobond investors to open Russian currency and rouble accounts. The money would be channeled through Russia’s National Settlement Depository (NSD), which is not under Western sanctions.

According to JPMorgan’s calculations, there are currently $2.54 billion in net notional credit default swaps outstanding against Russia, including $1.68 billion on the country itself and the rest on the country. CDX.EM index.

Russia had nearly $650 billion in gold and foreign currency reserves available before the invasion of Ukraine, which it calls a “special military operation”, compared to $40 billion in international debt. He also earns billions of dollars a week selling oil and gas.

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Reporting by Rodrigo Campos and Jorgelina do Rosario, editing by Karin Strohecker and Barbara Lewis

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