In tackling the sovereign debt, the Russian contingent at the recent IMF/World Bank Spring meetings in Washington said that the dollar payment is unencumbered. They spread the word to people that the authority has no issue in paying the debt. The U.S. The Treasury Office of Foreign Assets Control, on the other hand, opened the transaction. So, the analysts said that there would be a potential curve-ball for April 2022 bonds.
Previously, Russia had launched a one-day tender offering the bond. The country had $2bn outstanding for participating noteholders in rubles. In order to ease the Russian residents’ frustration, the country bought back $1.45bn of the bond. The residents here are those who have yet received the proceeds from the sovereign on the U.S. dollar bonds.
Although foreign creditors have done that, the blockages in the payments system due to the global sanctions hinder them. The source said that it was still uncertain about the international clearing houses recognizing the validity of this exercise. Furthermore, the rating agency is no longer covering Russia. It indicates that any payment other than the U.S. dollars would constitute a default on the bond.
In other words, the clearing houses could still block payments on the 2022 bond. The tender offer burdens the 2022 curve-ball issue. Euroclear and Clearstream did not respond to the comment. The other issue could trigger credit default swap contracts . Investors took it against a default on Russia sovereign debt.
The investor argued that the legal challenges can go exponentially. The Russian moreover, will argue that they could pay the debt so there should not be any rumor about default. Others on the other hand believe that default is inevitable. So far, people are choosing the right and left side of the court debate, making it messier.
