May 16, 2022

The Queens County Citizen

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Default risk | Russia has three weeks to pay off its debts in dollars

Default risk |  Russia has three weeks to pay off its debts in dollars

(Washington) Moody’s Investor Arm on Thursday confirmed that Russia could be “considered the default” if it did not pay two dollar installments by the end of the grace period on May 4.

Posted at 4:51 p.m.

For several weeks, despite the sanctions imposed on it by Russia, the default risk was averted because the US Treasury allowed the use of foreign currencies held by Moscow abroad to pay off foreign debts.

But the US ministry has tightened sanctions, saying it will not accept dollars held by Moscow in US banks.

Russia’s Finance Ministry announced in early April that it had settled a debt of about $ 650 million in rubles.

Moody’s said in a statement that the payment of two bonds maturing in 2022 and 2042 in rubles, rather than in US dollars, would “change the terms of payment from the original contracts and Moscow would be considered the default if it did not pay”. Debt by May 4, grace period is coming to an end.

“Bond agreements do not provide any reimbursement in any currency other than the dollar,” Moody’s continued.

“Although Eurobonds issued after 2018 allow repayments in rubles under certain conditions, those issued before 2018 (including 2022 and 2042 bonds) do not have this alternative currency provision or only allow repayments in other strong currencies (dollar, euro, pound sterling) or the Swiss franc. ) ”, Agency details.

On April 9, financial rating agency S&P Global Ratings announced that Russia had downgraded its foreign currency payments rating to “selective default” because Moody’s had settled the debt in Moscow rubles.

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May be states, financial institutions (International Monetary Fund, World Bank, etc.) or investors in financial markets.

The default is partially eligible when the state does not repay a portion of its obligations.