Business and economic news: Live updates

credit …Maxim Shemetov / Reuters

S&P Global has put Russia on a “selective default” rating after the Russian government said last week it had repaid about $ 650 million in debt denominated in rubles.

The rating agency said late Friday that it does not expect investors to be able to convert payments into rubles into US dollars, which were equivalent to the original amount due, pushing Russia to its first default on foreign currency government debt in more than a century.

The bonds have a 30-day grace period, which gives the Russian government time to pay in dollars or find another way to avoid default. S&P Global has said it does not expect the government to convert payments within the grace period.

“Sanctions against Russia are likely to be further intensified in the coming weeks, which will hamper Russia’s willingness and technical ability to meet the conditions of its obligations to foreign debt holders,” the rating agency said.

On April 4, a Russian government bond denominated in dollars matured and another coupon payment matured. The same day, the US Treasury Department tightened restrictions on Russian transactions in an attempt to force Russia to choose between draining the dollar reserves it has or using new revenues to avoid default. The department blocked Russia from using dollars held in US banks for its bond payments, and the transactions were not completed by JPMorgan. Russia’s finance ministry later said it had paid off the debt in rubles.

While the finance ministry said it believed its debt obligations were “fully” met, rating agencies said paying in a currency other than the agreed one would be a default. None of the bonds due on April 4 had a provision for payment in a currency other than dollars.

Sanctions, including the freezing of central bank reserves held abroad, were imposed on Russia following its invasion of Ukraine in late February. After that, the rating agencies reduced Russia’s debt to the status of garbage and investors bet on default. But for weeks, Russia continued to pay its debts. U.S. officials have authorized the transactions, saying U.S. bondholders will be eligible to receive debt payments, despite sanctions, until May 25.

If Russia does not pay its debt in dollars, it is unclear how the issue will be resolved. Until the 30-day grace period for bond payments expires on April 4, credit rating agencies will be barred by EU sanctions from issuing any ratings to Russian organizations and will not be able to assess whether a default has occurred. . Companies are withdrawing all their ratings before the EU deadline of April 15.

Last month, Russian Finance Minister Anton Siluanov accused countries that had frozen Russia’s international foreign exchange reserves of trying to create an “artificial default”. Last week, the finance ministry said that if the reserves were unfrozen, then payments in rubles could be converted into dollars.

S&P Global also said on Friday that it has maintained its “CC” bad debt rating for Russia’s government debt in rubles (known as local currency debt), as it is unsure whether non-resident bondholders can access their coupon payments.

According to documents on the website of the Russian Ministry of Finance, coupon payments are paid for bonds in local currency. But in March, Russia blocked interest payments to non-residents.

“We do not currently have definitive information on the payment process,” the agency said.

Leave a Comment

Your email address will not be published.