Russia has paid interest it owed on two dollar-denominated sovereign bonds, allaying doubts about its willingness and ability to service foreign debt in the wake of tough Western-imposed sanctions, but a busy payment schedule ahead will keep investors cautious.
Failure to pay could have led to Russia’s first foreign bond default in more than a century, and the situation was seen as a major test after sanctions aimed at punishing Moscow for its invasion of Ukraine.
But this Friday (18), the Russian Ministry of Finance said it had fully met its obligations. Sources involved in the multi-step process of paying out the coupons, worth $117 million, also confirmed that the funds were on their way to creditors.
The coupons were due last Wednesday, but Russia would have a 30-day grace period to make the payment, which must be received in full and in the right currency to avoid default.
Russia has about $40 billion of foreign bonds outstanding, half of which are held by foreign investors. It is unclear whether domestic holders of Russia’s bonds, which include some of the country’s biggest creditors, have received the payments.
However, this week’s payments were the first of many Russia must make to keep its complex web of foreign debt intact.
The next payment on international bonds is for a US$66 million coupon due March 21, which also has a 30-day grace period.
The problem is that this dollar-denominated issue contains a clause that allows payment in alternative currencies such as the euro, pound, Swiss franc and even the Russian ruble.
That’s because Russian bonds issued after 2014 — when Russia was sanctioned for the annexation of Crimea — contain a provision that authorizes payments in alternative currencies.
For bonds sold after 2018, the ruble is listed as an alternative currency option.
In total, Russia is due to pay another $615 million in coupons by the end of March and more than $4.5 billion in coupons and maturities by the end of the year.
Source: CNN Brasil
I am Sophia william, author of World Stock Market. I have a degree in journalism from the University of Missouri and I have worked as a reporter for several news websites. I have a passion for writing and informing people about the latest news and events happening in the world. I strive to be accurate and unbiased in my reporting, and I hope to provide readers with valuable information that they can use to make informed decisions.
