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Russia rushes to avert historic default, bondholders wait for payments

Russia faces a new threat of debt Default on May 4, according to major rating agencies, as the grace period comes to an end after trying to service dollar bond payments in Russian rubles.

Mikhail Tereshchenko | Satellite | via Reuters

Russia is watching set meet another deadline for debt payments on Wednesday after using its domestic foreign exchange reserves to prevent a historic sovereign default.

US office of Foreign Assets Control, a department of the Treasury that manages the economic and trade sanctions, received payments from Moscow last week. And Bloomberg reported on Tuesday that at least one international the clearing house processed the payments for $650 million in coupon and principal payments on maturing eurobonds in 2022 and 2042.

It is reported that the funds were sent to the London branch. of Citibank, but it is not clear if they will reach the recipients before the deadline. press secretary for Citibank declined to comment.

U-turn of the Ministry of Finance of Russia on Friday came after he initially tried to make payments on This dollar- denominated bonds in Russian rubles on April, 4. Major rating agencies have suggested that this first foreign debt default since 1917, if Moscow did not manage to fulfill its obligations in foreign exchange at the end of monthly grace period on May 4th.

Timothy Ash senior Emerging Markets Strategist at BlueBay Asset Management, on Tuesday expressed surprise that OFAC appeared to have waived payments following its previous tough announcement.

“OFAC stores all options open. He still has option of do not renew general license on May 27 and may act at any time to prevent Western institutions from processing bond payments,” he told CNBC. via Email the address.

Ash said latest Events have shown that Russia wants to pay off its foreign creditors and has the resources to do so, in addition to those frozen by the sanctions.

“UQIA can force Russia in default at any time. OFAC is still in driver’s seat, he said. added.

Trying to pay in rubles came after the US Treasury refused in beginning of April refusal for Russian payments to foreign bondholders will go through despite US sanctions, special the permission he gave in March.

Around half of Russia’s huge foreign exchange reserves have been frozen by punitive economic sanctions imposed by international powers in commemoration of This invasion of Ukraine.

S&P Global Ratings downgraded Russia’s foreign trade rating.debt credit rating for “selective default” after the payment in rubles on April 4, while before the attempt dollar payment, Moody’s suggested that the deviation from the payment terms of in original bond contracts by payment in rubles can be considered a default on May 4, if not fixed.


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Tyler Hromadka
Tyler is working as the Author at World Weekly News. He has a love for writing and have been writing for a few years now as a free-lancer.

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