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Moody’s: Russian bondholders likely to get a fraction of their investment

2022-03-07 12:57

2022-03-07 12:57

Moody's: Russian bondholders likely to get a fraction of their investment
Presented. Mike Segar / / Reuters

Rating agency Moody’s reported that foreign bondholders are likely to get back only a portion of their investment.

“For the first time since the Bolshevik Revolution in 1917, there was + the specter of a serious default on foreign bonds +” – this was stated by Reuters in his analysis.

The letter’s authors quoted Moody’s as saying that “the risk of default has increased and that foreign bondholders are likely to get back only a portion of their investment.”

“On Sunday, Moody’s downgraded Russia’s credit rating to Ca, the second lowest in the rating scale, citing the control of the central bank’s capital that could limit the country’s foreign debt payments and lead to default,” Reuters recalled. Moody’s explained its decision as “serious concerns about Russia’s willingness and ability to meet its obligations.”

The Russian Ministry of Finance confirmed in an official statement that it “will provide service and repay the state’s debts in full and on time, but repayment may be hampered due to international sanctions.” Reuters has a different opinion, as “there is a possibility of default on technical debt.” This is because most of Russia’s financial reserves of $640 billion were frozen by the West in response to the aggression against Ukraine.

In addition, the Russian Finance Ministry said that “Russia will use the ruble in payments to residents for bonds denominated in foreign currencies.”

It’s not just penalties that make bonds difficult to repay. “The Ministry of Finance in Moscow has clearly stated that Russia may not be able to pay its obligations on time also due to the restrictions imposed by its government,” Reuters reported.

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As reported by Reuters, this is the first such situation in Russia in more than a century. The agency stated that “In 1918, the Bolsheviks abandoned the tsarist debt, which shook the world debt markets. Then Russia had one of the largest external debt packages in the world. This shook the global bond markets.”

The situation was different in 1998, when Russia failed to repay $40 billion. Domestic debt The ruble was devalued during the reign of Boris Yeltsin. Reuters noted that the underlying reasons are different: “Russia filed for bankruptcy at that time, which was linked to the Asian financial crisis and a decline in confidence in the ruble’s short-term debt due to low oil prices.”

“Even after the dissolution of the Soviet Union, Russia took over its foreign debt,” Reuters stressed. “This time Russia has money, but it cannot pay it, because the reserves – the fourth largest in the world – which Putin ordered to be accumulated in the event of such a crisis, were frozen by the United States, the European Union, Britain and Canada “- concluded the agency.

Reuters noted that the Russian debt was not generated by the government alone, but also from private companies that had accumulated much larger foreign debt. “Among them, Gazprom has bonds worth $1.3 billion – maturity date is Monday, March 7,” Reuters reported. (PAP)

Author: Ewa Nehring

uh / mmu/