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Russia in first foreign debt default in over a century, bondholders claim

Russia is rumored to have missed the deadline to pay international bond investors, which would make it default for the first time ever since the 1917 Bolshevik Revolution.

According to Reuters, some holders of Russian Eurobonds in Taiwan had not received interest after the grace period ended on Sunday.

Moscow was to pay $100m (PS81.4m), in Eurobond payments. These were $29m for a Euro-denominated bond 2036 and $71m for a bond 2026.

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It is not clear how any default could have occurred.

Russia’s finance ministry stated that it paid the money in dollars and euros, and it fulfilled its obligations.

It indicated last week, however, that it was trying to meet the looming payment deadlines by paying in roubles. This was in response to Western sanctions on its war in Ukraine.

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They have had hundreds of billions of dollars worth of their currency reserves frozen abroad.

A large part of the global market has been closed off to the country’s banks system.

Bloomberg News reported that the Russian finance minister described the apparent default in a “farce” as it was.

Russia has not defaulted on its obligations, as the Kremlin repeatedly stated.

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March: World Bank ‘anticipates’ Russian default

It wasn’t clear if a rouble payment via Euroclear, a Belgia-based bank, had been blocked. Bondholders may have declared Russia in default because the money wasn’t in the right currency.

However, a default was deemed inevitable when the US Treasury refused to renew an exemption from sanctions rules that allowed payments to foreign bondholders.

Jay S. Auslander is a New York-based lawyer who specializes in sovereign debt. He said that it might take some time for a determination of a default.

“While magic is possible, nobody is betting on it.”

“The overwhelming likelihood is that they won’t because no bank will move the money.”

Although a formal default would not be considered a serious event, as Russia cannot borrow internationally at this time, it could increase Russia’s borrowing costs when Russia returns to the bond markets.

There are $40bn in outstanding international bonds, approximately half of which are held abroad.


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