Fitch Says Would Classify Russia's Payment on Dollar Bonds in Rubles as Sovereign Default

© maga.econ.msu.ruFitch Ratings
Fitch Ratings - Sputnik International, 1920, 16.03.2022
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MOSCOW (Sputnik) – The international rating agency Fitch said that it would classify Russia's repayment in rubles of dollar-denominated government bonds due on Wednesday as a sovereign default.

"According to Fitch Ratings’ Sovereign Rating Criteria, the payment in local currency of Russia’s US dollar Eurobond coupons due on 16 March would, if it were to occur, constitute a sovereign default, on expiry of the 30-day grace period," the agency said in a statement issued on Tuesday.

This kind of forced redenomination would correspond to Fitch’s downgrade of Russia's Long-Term Foreign-Currency Issuer Default Rating (LT FC IDR) from "B" to "C" levels, entailing the beginning of a default, the agency warned. In line with its criteria, the affected issue ratings would be downgraded to "D," while the LT FC IDR – to "Restricted Default" unless coupon payments are made in US dollars by the end of the grace period in line with the initial terms.

In addition, Russia’s LT FC IDR of "C" corresponds to failure to provide non-resident investors with the local-currency coupons of federal loan bonds (OFZ) that were due on March 2, the statement read.

According to Fitch, the Russian Finance Ministry made coupon payments on the 2024 OFZs to the National Settlement Depository, but failed to provide them to foreign investors due to the restrictions of Russia’s Central Bank.

Fitch will consider the lack of these payments as a default unless they are made within 30-day grace period, the statement read.
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