Russia to pay bonds in rubles, which may cause default
ABC News
Russia says it made a debt payment in rubles this week, a move that may not be accepted by Russia’s foreign debtholders and could put the country on a path to an historic default
NEW YORK -- Russia said Wednesday that it made a debt payment in rubles this week, a move that may not be accepted by Russia’s foreign debt holders and could put the country on a path to an historic default.
The Ministry of Finance said in a statement that it tried to make a $649 million payment toward two bonds to an unnamed U.S. bank — previously reported as JPMorgan Chase — but that payment was not accepted because new U.S. sanctions prohibit Russia from using U.S. banks to pay its debts.
Russia said it has instead transferred the funds in rubles into a special bank account with Russia’s National Settlement Depository, the country’s securities regulator. The ministry added that once the country is allowed to access foreign exchange markets — not something that will happen for the foreseeable future due to sanctions — it will decide whether to allow bondholders to convert the ruble payment back into dollars or euros.
While Russia has 30 days of leeway to catch up with its payments, investors have been betting on a default. The contracts governing Russia’s bonds require in most cases payment in euros or dollars with few and narrow exceptions known as an alternative payments clause. Russia contends that it has met those exceptions but sovereign debt experts have argued otherwise.
