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Russia Remits Bond Payment To UK To Avoid Default
- By The Financial District
- Mar 19, 2022
- 2 min read
Russia’s Finance Ministry said it transferred a $117 million bond interest payment to a Citibank account in London to avoid a default on government debt but left it open if the money actually reached foreign investors by the deadline, the Associated Press (AP) reported.
Photo Insert: The Russian Ministry of Finance
A ministry statement carried on Russian state media said the money had been transferred to the London account and that the ministry would make a statement later on the results of the transfer. Citibank had no comment.
The payment, which was due Wednesday, would be the first on foreign currency debt since Russia invaded Ukraine on Feb. 24. Russia has foreign currency debt amounting to $40 billion.
Russia is facing increased financial isolation after Western sanctions have frozen much of the government’s hard currency reserves held outside the country and barred transactions with some Russian banks.
The head of the International Monetary Fund (IMF) has said a state default is no longer “an improbable event,” and ratings agencies have slashed Russia’s credit rating to below investment grade, or “junk.”
Finance Minister Anton Siluanov has said that if sanctions result in banks being unable to carry out interest payments in dollars, Russia would pay in rubles, which ratings agency Fitch has said would constitute a default. The US Treasury website indicates that sanctions permit payments on Russian bonds through at least May 25.
Russia would have a 30-day grace period — until April 15 — if holders of the dollar bonds do not get their money. But Russia could face a default even before then. A March 2 payment on ruble-denominated bonds held by foreign investors was made into a state depositary fund but not sent on to investors because of Russian central bank restrictions.
Ratings agency Fitch says that would constitute a default after 30 days, or the beginning of April. On top of that, further bond payments are coming due in the weeks and months ahead.
