risk of default | Russia has three weeks to pay off debts in dollars

(Washington) The investing arm of Moody’s confirmed Thursday that Russia “could be considered insolvent” if it fails to pay $2 in installments by the end of the grace period on May 4.

Posted on April 14th

For several weeks, despite the sanctions imposed on Russia, Russia was able to avert the threat of a default because the US Treasury Department allowed the use of foreign currencies held abroad by Moscow to pay off foreign debt.

But the US Department has tightened sanctions and will no longer accept dollars held by Moscow in US banks.

The Russian Treasury announced in early April that it had settled a debt of nearly $650 million in rubles.

Moody’s said in a statement that paying two bonds due in 2022 and 2042 on April 4 in rubles instead of US dollars “changes the payment terms from the original contracts and can therefore be considered default” if Moscow fails to pay them Debt until May 4th, the end of the grace period.

“The bond agreements do not provide for repayment in any currency other than the dollar,” Moody’s continues.

“Although Eurobonds issued after 2018 allow redemptions in rubles under certain conditions, those issued before 2018 (including the 2022 and 2042 bonds) either do not contain this alternative currency clause or only allow redemption in other strong currencies (dollars, euros, sterling or Swiss francs) », explains the agency.

As early as April 9, the financial rating agency S&P Global Ratings announced that it had downgraded Russia’s rating for its foreign currency payments to “selective default” precisely because Moscow had paid off Moody’s debt in rubles.

A country is considered to be in default when it is unable to meet its financial obligations to its creditors, which may be sovereigns, financial institutions (International Monetary Fund, World Bank, etc.) or investors in the financial markets.

The non-compliance is called partial when the state fails to pay part of its obligations.

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