Investors remain alert to risk of Russian default

The Russia’s creditors They are keeping an eye on a bond payment due Monday as doubts remain over whether the government will continue to meet its debt obligations in the face of tough sanctions imposed following Vladimir Putin’s invasion of Ukraine.

It is one of many payments looming on Russia’s tight schedule on debt issued to foreign investors.

Last week, fears of a default subsided after $117 million in interest began trickling down to international investors. But with central bank reserves frozen abroad, speculation remains for how long Russia will continue to service its debt.

The payment due Monday is a $66 million coupon on a 2029 dollar bond, according to calculations by Bloomberg. This debt has an alternative option in rubles, which allows Russia to make the payment in its local currency. But given sanctions and internal capital controls, it is unclear whether international investors can access the funds if they are transferred to local accounts.

It is also unclear whether coupon payments have been made on a local currency bond, known as OFZ, which was due in early March.

Fitch Ratings he said last week that Russia would be at risk of default if it fails to meet that obligation within 30 days, setting April 1 as another key date for the country, which has not defaulted on local-currency bonds since 1998.

“In this context, each coupon payment and bond redemption is monitored by the market to understand whether or not it occurs in an orderly manner, with a delay within the grace period or not.said Antoine Lesne, head of ETF strategy and research for State Street SPDR, which owns some Russian government bonds.

In another sign of Russia’s isolation from global financial markets, several companies are also fighting to get authorization for debt payments. As of the end of last week, investors had still not received payments from Severstal PJSC, putting the mining company at risk of default after the grace period expires at the end of this week.

The steel company Evraz Group SA, in which the sanctioned Russian billionaire Román Abramóvich participates, reported on Monday that it had made a coupon payment of US$ 18.9 million, but that the funds had been blocked by its correspondent bank, Société Générale SA, for compliance reasons.

Clearinghouses Clrearstream and Euroclear have stopped accepting the ruble as a settlement currency and have excluded securities issued by Russian entities from all Triparty transactions, excluding them from a traditional channel used to make payments to bondholders.

Gold miner Polyus PJSC and state transport operator Russian Railways are some of the companies with payments due in the coming weeks.