Breaking News
Investing Pro 0
New Year’s SALE: Up to 40% OFF InvestingPro+ CLAIM OFFER

Teetering on default, Russia misses $1.9 million payment, committee determines

Stock Markets Jun 01, 2022 07:50PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. Woman holds Russian Rouble banknotes in this illustration taken May 30, 2022. REUTERS/Dado Ruvic/Illustration
 
BAC
+0.31%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
JPM
+0.24%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
DBKGn
+1.71%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

By Rodrigo Campos and Jorgelina do Rosario

NEW YORK/LONDON (Reuters) -Russia's failure to pay $1.9 million in accrued interest on a dollar bond will trigger payouts potentially worth billions of dollars, a panel of investors determined on Wednesday, as the country teeters on its first major external debt default in over a century.

Sanctions imposed by western countries and their allies on Russia following its invasion of Ukraine on Feb. 24, as well as counter measures by Moscow, have all but excluded the country from the global financial system. The lapse last month of a key U.S. license allowing Russia to make payments put the prospect of the country defaulting back into focus.

A Credit Derivatives Determinations Committee (CDDC) overseeing Europe, whose members are banks and asset managers, said on its website https://www.cdsdeterminationscommittees.org/cds/the-russian-federation-3 on Wednesday that it voted 'yes' to a question on whether a "failure to pay credit event" occurred with respect to Russia.

Citibank was the sole 'no' vote, while 12 other members voted 'yes'.

Russia's international 2022 bond matured on April 4 and payment of principal and interest due at maturity was not made until May 2. During that period, Russia was obligated to continue to pay interest which a holder calculated at $1.9 million.

The CDDC was then asked to determine if Russia's non-payment constituted a failure to pay that would trigger payouts for insurance against a default, or credit default swaps (CDS).

The committee, whose members also include Goldman Sachs (NYSE:GS), Bank of America (NYSE:BAC), Deutsche Bank (ETR:DBKGn), Elliot Management and PIMCO, agreed that https://www.cdsdeterminationscommittees.org/documents/2022/06/dc-decision-01-06-22-russian-federation-interest.pdf the failure to pay happened on May 19 and that a request to find a resolution was submitted on May 26. Citi again voted 'no'.

The committee will meet again on June 6 at 2 p.m. London time (1300 GMT) to continue the process, which could move to set up an auction to determine any CDS payouts.

There are currently $2.54 billion of net notional CDS outstanding in relation to Russia, including $1.68 billion on the country itself and the remainder on the CDX.EM index, according to JPMorgan (NYSE:JPM) calculations.

A default for the purposes of CDS contracts "occurs once the determination committee votes for a credit event, which has now happened," said Gabriele Foa, portfolio manager of the Global Credit Opportunities Fund at Algebris.

"Of course ... it is a very small amount, so the definition of default is very technical. If, as it seems, it is not possible for foreign investors to receive dollars starting May 25, the default will soon be more material."

The focus for a wider default is now on a coupon payment due June 24 on a bond issued in 1998.

Russia has under $40 billion of international bonds outstanding and close to $2 billion in payments is due through year-end.

The country has the means to avoid default, with nearly $650 billion of available gold and currency reserves prior to the Ukraine invasion, which it calls a "special military operation", and makes billions of dollars a week selling oil and gas.

Russia's Finance Minister Anton Siluanov said last month that Moscow will service its external debt obligations in roubles if the United States blocks other options and will not call itself in default as it has the means to pay. Not all bonds allow for payment in roubles, however.

Russia has said it could extend a scheme used for its gas payments to sovereign bondholders, allowing Eurobond investors to open Russian FX and rouble accounts. The money would be channelled through Russia's National Settlement Depository (NSD), which is not under Western sanctions.

Russian dollar-denominated bonds rose between 1 cent and 2.5 cents on Wednesday, Refinitiv data show. They are in very distressed territory, ranging in price from 30 cents on the dollar to as low as 19 cents.

Teetering on default, Russia misses $1.9 million payment, committee determines
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your investing.com profile, will be public on investing.com and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (3)
Kamal Demachkieh
Kamal Demachkieh Jun 03, 2022 3:51PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Y we oooo
John Avenetti
John Avenetti Jun 01, 2022 1:39PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
why would they? the whole "nato" world (no leg to stand on) is after them.
Sidney Glover
Sidney Glover Jun 01, 2022 1:39PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
isn't Russia the aggressor? another sino-russian paid poster? or bot?
Keng He
Keng He Jun 01, 2022 12:50PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
don't worry. now, rouble anchors on russia natural resources such as gas, oil, food and fertilizer.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email