The Ministry of Finance of the Russian Federation still paid in dollars for two issues of sovereign bonds
Investors, invested in Russian bonds, started receiving payments, writes Bloomberg. We are talking about payments on Eurobonds for 649.2 million dollars.
29 April, the Russian Ministry of Finance announced the payment of a coupon and redemption of the face value on bonds of issue No. 12840060V "Russia-2022" and the payment of a coupon on bonds No. 12840061V "Russia-2042" maturing in 2042.
Payments were brought to the paying agent for these Eurobonds - London-based Citibank. Ministry of Finance stated, that he transferred the payment in US dollars, the currency of the bond issue.
The grace period for these bond issues ended 4 May. According to Bloomberg, separated Russia from a technical default 11 hours — the payment of the Ministry of Finance of Russia was processed by clearing centers in Europe. Three investors spoke about the receipt of payments in their depository banks.
How Russia was able to pay in foreign currency
Bloomberg told, that the Russian Ministry of Finance paid off from domestic dollar reserves due to the freezing of part of international reserves. Bank "Dom-rf" was involved in the payment, who was not subject to sanctions.
First, the correspondent bank of Bank of New York Mellon received money from Russia, and then forwarded them to Citibank. The payment could not be made without the approval of the US Treasury.
The Ministry of Finance was going to make payments on these Eurobonds in rubles
6 April Ministry of Finance told, that he transferred money to the holders of Eurobonds of issues No. 12840060V "Russia-2022" and No. 12840061V "Russia-2042" in rubles.
The department then announced, that could not make a payment in dollars due to the fact that, that the foreign correspondent bank refused to execute payment orders.
The Ministry of Finance transferred money to the National Settlement Depository in rubles at the rate of the Central Bank for 4 April and considered its obligations fulfilled.
After that, the rating agency Fitch warned, that the payment of dollar bonds in rubles will mean default at the expiration of 30 days — 4 May. Until the situation reached a default.
Russia can service Eurobonds up to 25 May
On this day, the general license of the Office of Foreign Assets Control of the US Department of the Treasury expires. (OFAC). It allows US citizens to receive payments from the Bank of Russia, National Welfare Fund (SWF) and the Ministry of Finance of Russia. After US residents will need individual permits to receive money.
Not yet known, will the license be renewed. Already 27 May Russia must pay off two issues of government bonds maturing in 2026 and 2036. But one issue allows payment in rubles, the other is in euro, francs or pounds sterling and payment in dollars to accounts outside the United States.
Even if Russia were declared a technical default, then the situation in the country would not become sharply worse
Possible default concerns only external debts. After its announcement, the country may no longer be considered a reliable partner, and foreign investors, probably, do not want to invest in the economy. But because of the sanctions, Russia is already cut off from the largest foreign markets..
We took apart, what is a default and how it can affect ordinary Russians.
