NEW YORK: Some creditors have received payment, in dollars, of Russian bond coupons which fell due this week, two market sources said yesterday, meaning that Russia for now may have averted what would have been its first external bond default in a century.
Earlier yesterday, Russia announced that it paid interest on foreign debt due this week. The finance ministry said in a statement that a payment order worth US$117.2 million (RM491.5 million) “was executed” after it was sent to a bank on Monday.
There had been concerns that the sanctions would prevent Moscow from accessing dollars to make the payment, causing a default if it used roubles instead.
Kremlin spokesman Dmitry Peskov said Russia has “all the necessary means” to avoid a default. “Any default that could arise would be purely artificial in nature,“ Peskov told reporters.
AFP, quoting a source familiar with the matter, reported that JPMorgan Chase had received a debt payment from the Central Bank of Russia.
JPMorgan, a corresponding or intermediary bank, sent the funds to Citigroup, the agent in charge of paying bond holders, after checking with US authorities, according to the person, who did not specify the amount received.
Both JPMorgan and Citigroup declined AFP's requests for comment.
The payments, due on March 16 but with a 30-day grace period, are seen as the first test of whether Moscow will meet its international debt obligations after Western sanctions hobbled its financial dealings.
“The coupon was paid, against my expectations, and in dollars,” one person said. Another person said the money had been received by a client who was a bondholder.
Some other creditors said they had yet to receive their funds but were optimistic they were on the way, noting they had received payments on hard currency bonds from a raft of state-run and private Russian companies in recent days.
The external sovereign bond payments were the first to fall due since the sanctions imposed over Russia's invasion of Ukraine and Moscow's tit-for-tat measures, and bondholders had feared the transaction would be frustrated.
Russia had planned to send the equivalent interest payment amount in roubles if dollar payments did not reach foreign bondholders, something credit rating agency Fitch said would constitute a sovereign default if not corrected within a 30-day grace period.
The March 16 coupons are the first of several, with another US$615 million falling due over the rest of the month. The first principal payment is due on April 4 when a US$2 billion bond matures.
“Even if this week’s payment is made, investors will need to then monitor the next upcoming payments as they may be treated differently,” Jonny Goulden, head of EM local markets and sovereign debt strategy at JPMorgan, said in a note.
He noted the upcoming payments either clear via the Russian NSD settlement mechanism or because they have the option to make the payment in roubles embedded in the bond contract.
After the May 25 sanctions deadline and until year-end, Russia is due to pay nearly US$2 billion more on its external sovereign bonds. – Reuters