A $1.9 million “nonpayment” was recorded in Russia-2022 Eurobonds by the Credit Derivatives Determination Committees (CDDC) within the International Swaps and Derivatives Association (ISDA), Reuters reported.
The decision was published on the association’s website on 1 June. The participants of the CDDC (hundreds of the largest international financial institutions, banks and others) voted that the “non-payment” of the Russian Federation occurred on May 19, 2022.
This event in English is called Payment Error and is equivalent to a default – from a purely technical point of view. This is necessary to pay investors CDS swaps, insurance against default.
Investors who previously purchased Eurobonds with futures in 2022 believe that Russia underpaid the $1.9 million in interest owed to them, and therefore the Russian Federation should be declared in default.
The Russian Ministry of Finance reported that sovereign Eurobond payments of Russia-2022 and Russia-2042 issuances were made – but for a total of 649.2 million rubles, which should have been initially. Difficulties with dollar payments (this currency was supposed to be used) arose due to sanctions, because on April 4, the US Treasury stopped allowing Russia to make dollar payments to public debt from accounts in American banks.
Then the Ministry of Finance of Russia announced It continued to fulfill its obligations in US dollars. Bloomberg noted that non-sanctioned “in-dollar reserves” were used for the payment. The Russian state was compelled to do so, as ISDA and global rating agencies threatened Moscow with default after the grace period expired on May 4.
Earlier, investors claimed that the RF Ministry of Finance redeemed Eurobonds not on the specified date, but during the grace period. Russian Eurobonds matured on April 4, but the principal and interest payment only took place on May 2, according to CDDC. Therefore, Eurobond holders can count on additional interest – the same $ 1.9 million, but this amount has not been paid.
Issue terms include accruing interest until the original debt is repaid.
On May 30, Russian Finance Minister Anton Siluanov announced that Russia would close its foreign debt under a similar plan to pay for natural gas in rubles. According to the head of the Ministry of Finance, this will allow avoiding the use of Western settlement infrastructure – all payments will be made through the National Settlement Depot (NSD).
Prior to that, he described the US Treasury’s refusal to renew Russia’s license to pay off its public debt as an “exotic measure”.
Bloomberg also reported that the next payments of Eurobonds will be made on June 23 – these are dollar bonds with an alternative payment option that can be made in euros, British pounds or Swiss francs.
Source: Gazeta
Barbara Dickson is a seasoned writer for “Social Bites”. She keeps readers informed on the latest news and trends, providing in-depth coverage and analysis on a variety of topics.