The agency reported Bloombergwho has read the bond documents.
According to journalists, the Russian Federation will not officially declare a default, but the fact of non-payment to investors will be recorded.
If Russia does not make the payment, it will be in default on its external debt as early as the morning of June 27, for the first time since the beginning of the last century, the agency writes.
According to Bloomberg, the default will be “for the time being mostly a symbolic event,” since the Russian Federation is already a political, economic and financial pariah in most countries of the world.
After sanctions imposed against Russia for invading Ukraine, rating agencies downgraded its credit ratings. Specifically, on March 9, Fitch stated that considers its sovereign default inevitable.
The Ministry of Finance of the Russian Federation stated that, without access to foreign exchange reserves, Russia will make payments in rubles. But, as explained by the rating agency Fitchthe payment of coupons on Eurobonds in the national currency will mean Russia’s sovereign default.
On April 6, Russia paid off its Eurobonds in rubles for the first time. The Ministry of Finance said that the correspondent bank refused to carry out orders on Eurobonds maturing in 2022 and 2042 in the amount of $649.2 million. After that, S&P downgraded Russia’s long-term sovereign credit rating in foreign currency before “selective default”.
After the first payment in rubles, a 30-day grace period was established, which ended on May 4. The Russian Federation was threatened with default if it had not had time to pay off in dollars before this date.
However, on April 29, the Russian Finance Ministry said it had paid $564.8 million in 2022 Eurobonds and $84.4 million in 2042 Eurobonds. Both payments were made in dollars. According to Bloomberg, Russia used the non-sanctioned Bank Dom.RF to pay coupons on its Eurobonds using dollar reserves. Then “Bank Dom.RF” transferred the funds to the correspondent bank Bank of New York Mellon.
USA at the end of May closed the loophole in the sanctions and the Russian Federation will not be able to use an alternative payment method, Bloomberg emphasizes.
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