Russia says it has made its $117 million eurobond interest payment to Citibank

A $117 million interest payment due on two bonds was made to Citibank in London, according to Russia’s Finance Ministry, amid rising rumours that the country is on the verge of defaulting.

The ministry disclosed this to Bloomberg and stated that it will comment separately later on whether the payment had been credited. Citibank is Russia’s Eurobond payment agent.

Nairametrics earlier reported that Russia’s finance ministry said a temporary mechanism for repaying foreign currency debt had been approved but warned that payments would be made in roubles if banks were unable to honour debts in the currency of issue due to sanctions.

What you should know 

As a result of Western sanctions over the events in Ukraine, Russia has been cut off from key sections of the global financial markets, creating the country’s worst economic crisis since the fall of the Soviet Union in 1991.
The coupons on the two notes were to be honoured by the end of business Yesterday. If it does not do so within the grace period, it will be the first time since the Bolsheviks rejected the Czar’s debts in 1918 that the country has defaulted on its obligations to international creditors.
Without access to its foreign reserves, Russia would make the payment in rubles, according to Finance Minister, Anton Siluanov, who outlined a process that entails transferring cash into local accounts.
These bonds are subject to a 30-day grace period. Credit rating agencies will most likely deem Moscow in default if it does not make a payment, and bondholders will begin to bargain.

However, making a settlement in a currency other than the dollar within the grace period, according to Fitch Ratings, would be regarded as a default. Earlier this month, S&P Global Ratings made a similar conclusion.

The rating can be lowered to default by rating agencies, or the problem can be decided by a court. Bondholders with credit default swaps derivatives, which operate as anti-default insurance plans, can petition a “determinations committee” of financial firm representatives to assess whether a failure to pay should trigger a payout, which is still not a formal declaration of default.

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