Russia rushes to pay its more than 100 years external debt to avoid default. The ministry of finance said the country had paid two U.S. dollar bonds in ruble issuance. The debt sovereign has made payments for its April 2022 and 2024 for Citibank just days before the expiry date. The news said Russia bonds rally with the 2024s quoted at 29/33. However, one of the FM lending bondholders said that the firm did not receive the payment yet.
No one is certain on how the money would get through the various financial intermediaries. A fund manager indicated that the money is with Citibank. So, it should go on to Euroclear so that it pays on to the bondholders. Citibank however is waiting for indemnification because they are aware about contravening sanctions. They can’t get hold of Citibank but the regulators refuse to give clear indemnification.
The problem is, the money is there but bondholders do not receive it. So, default could still happen. Citibank however declined to give comments about the situation. The big question would be where is the money used to make the payments come from. Apparently, the U.S. The Treasury had blocked the route following the service of the U.S. dollar bonds in ruble.
Therefore, Moscow is in a dilemma. It deploys reserves held onshore or default. Russia has tried to circumvent the problem by threatening payment in rubles. Although, it could be a breach of the terms of both bonds’ documentations. Russia is struggling to avoid default stigma.
It looks like the finance ministry has deployed domestic reserves to make the $564.8m of principal. The coupon payments would expire in April 2022. The $84.4m of coupon payments ended in April 2024s. A senior U.S. official argued that the money had come from funds that hadn’t been sanctioned.
