Standard & Poor’s says Russia has a “selective” default on foreign currency payments
Financial rating agency S&P Global Ratings on Saturday lowered Russia’s rating on its foreign currency payments to a level “selective default”after Moscow repaid dollar debt in rubles earlier this week.
The agency’s rating for payments in foreign currencies such as the dollar has been downgraded to “standard accuracy”while the note remains in ” Copy “ As for payments in rubles, according to a press release from the agency, which also announced that it will immediately stop its ratings on Russia, in accordance with EU requirements. Only one score below the SD on the agency scale: rating “Dr”default.
“We do not believe that investors will be able to convert these ruble payments into dollars equivalent to the amounts originally owed, and we do not believe that the government will convert these payments within the thirty-day grace period.”says S&P.
The agency believes that it is likely that sanctions against Russia will be strengthened in the coming weeks Impeding Russia’s willingness and technical capabilities to honor the terms and conditions of its obligations to foreign debtors..
Like all countries, Russia borrows money in the form of bonds, often in dollars, and must regularly pay interest and repay the principal. A country is considered in default when it is unable to meet its financial obligations to its creditors, which may be countries, financial institutions (IMF, World Bank, etc.) or investors in financial markets. Partial default is when the state does not pay part of its obligations.
For several weeks, Russia avoided the risk of default, as the US Treasury allowed foreign currency held by Moscow abroad to be used to settle foreign debts. In March, Russia paid several tranches of interest, which indicates its willingness and ability to repay.
But since Monday, the United States no longer allows Russia to repay its debts with dollars held in American banks. As a result, JPMorgan, which acted as a correspondent bank, withheld repayment.
As a result, the Russian Ministry of Finance announced, on Wednesday, that it had paid in rubles nearly $650 million due on April 4. The three major rating agencies, S&P, Fitch and Moody’s, act as arbitrators to declare a country in default. But Fitch and Moody’s have already abandoned the assessment of Russian state and corporate debt, in the context of sanctions against Moscow. S&P Global Ratings was supposed to stop ratings by April 15, but finally announced on Saturday that it would stop doing so immediately.
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