Default Insurance Regulator Recognized Russia's "Non-Payment" on Eurobonds

The International Swaps and Derivatives Association (ISDA) recorded the event of "non-payment" on Eurobonds of the Russian Ministry of Finance maturing on April 4th. We are talking about a controversial additional interest on bonds that RUSSIArepaid in general

The Credit Events Committee of the International Swaps and Derivatives Association (ISDA) has recognized a “Failure to Pay” credit event on usd Eurobonds of the Russian Ministry of Finance maturing April 4, 2022. The decision on this, dated June 1, is published on the association's website. The committee members, including global banks, voted that the Russian Federation's default occurred on May 19, 2022.

We are talking about DOLLAR bonds of the Ministry of Finance, the balance of which for $552 million Russia was supposed to pay off on April 4. However, at that time , the United States blocked Russia's ability to pay its debts from frozen reserves, and the Ministry of Finance initiated the fulfillment of the obligation in rubles. Western market participants prepared to default on these bonds, citing an uncoordinated change in the currency of payment, however, at the end of April, the Ministry of Finance still managed to bring funds in dollars to foreign investors (according to Western media, dollar accounts of the mortgage corporation free from encumbrances were used for this "Dom.RF").

Russia now has a way to avoid default even without a US license Economics

On May 11, former holders of these securities, who had received their principal payment by May 2, filed a notice of Russian default with the Euroclear clearing system, alleging that they had not received additional $1.9 million in interest accrued for the period from April 4 to the date actual redemption of the bonds. Russia, when paying off the principal at the end of April, did not include this additional interest in its payment, they argue. “Following the demand of the paper holders, Russia never paid this interest,” the creditors write.

The terms of the Eurobonds maturing on 4 April 2022 did include a clause stating that each bond would cease to bear interest on the date of their maturity, except in cases of “wrongful” retention of funds or refusal to pay them. In this case, the outstanding or late repayment of the main debt continues to accrue interest at the rate of 4.5% per annum until the date of final repayment. At the same time, the Russian Ministry of Finance regularly tried to return dollars to creditors, and the delay in transferring them under the April Eurobonds was initially caused by the US decision to prohibit servicing Russian public debt from the blocked reserves of the Ministry of Finance (Bank of Russia).

Siluanov explained Russia's desire to avoid default

At the end of May, the US authorities went even further and canceled Russia's ability to service its dollar bonds in any way. The bond documentation contains the “Currency Indemnity” condition, which theoretically opens up a way for payments in rubles without a reason to declare a Russian default if investors change these rubles for dollars in a timely manner through the National Settlement Depository, RBC wrote. Finance Minister Anton Siluanov indirectly confirmed this scheme, saying that bondholders would be asked to receive rubles and exchange them for foreign currency through the Russian infrastructure, Vedomosti wrote. RBC sent a request to the Ministry of Finance.

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