Russia Fails to Make Interest Payment on Dollar Bonds

Holders of Russian dollar-denominated bonds that had coupon payments due Wednesday have yet to receive payment confirmation, as the West’s sanctions made it increasingly difficult for Moscow to fulfill its foreign debt obligations.

According to Reuters, Russia failed to make a $117 million interest payment on two dollar-denominated government bonds as of Wednesday night, igniting the 30-day grace period. If payment is not received— or is received but in rubles— creditors can declare an official default as of April 15.

Russia, on the other hand, said that it’s not at fault, given that it has the money to make the payments, but the West’s sanctions are impending the process. “The possibility or impossibility of fulfilling our obligations in foreign currency does not depend on us,” said FinMin Anton Siluanov to RT. “We have the money, we paid the payment, now the ball is on the side, first of all, of the American authorities.”

Earlier, Siluanov explained that since the Russian central bank’s foreign currency accounts were slapped with sanctions, the coupon payments might have to be made in rubles. “The payment arrived at the appropriate American bank, which is our foreign currency account holder,” he said, as cited by Russian news agency RIA. “Currently the payment is being processed and so far we have had no statements on whether it has or hasn’t gone through. So far it hasn’t gone through. But we know that the bank is in talks with OFAC, has requested the necessary information from us about the purpose of the payment. So we are currently waiting for information from our account-holder bank.”

According to data from Algebris Investments, Russia owes approximately $491 billion worth of foreign debt, of which $80 billion is due in the next year. Approximately $20 billion is in the form of dollar-denominated bonds, which are owned by foreign investors. In the event that Russia does end up defaulting on its debt, the impact likely won’t be as severe, since a lot of foreign companies and investors previously divested their assets from Russia during the first round of sanctions in 2014 in response to Putin’s annexation of Crimea.

Information for this briefing was found via the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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