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Russian ruble bond payments could lead to delays

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News Tech: Russia on Wednesday announced it had made debt repayments in the ruble this week, which may not be acceptable to Russia’s foreign creditors and could result in a historic debt default, the finance ministry said in a statement. attempted to pay out $649 million on two bonds to an unnamed US bank (previously reported as JPMorgan Chase), but new US sanctions forced Russia to Said the payment was not accepted as it prohibits using a bank to make payments. debt. Russia said it transferred the funds in rubles to a special bank account at the Russian National Clearing House, the country’s securities regulator.

His G. Mitugrati, a professor at the University of Virginia School of Law and an expert on government debt restructuring and contracts, said: said in an email. “It’s a debatable question. I would argue otherwise. Rating agencies have downgraded Russia’s debt to ‘junk’ with a very high probability of default. Russia has suggested it is ready to pay its debts, but the Kremlin has warned it will continue to pay its creditors in rubles rather than dollars or euros if sanctions persist.

The ministry added that once the country gains access to the foreign exchange market (which sanctions prevent for the time being), it will decide whether bondholders will be able to convert their ruble payments into dollars or euros. Russia says he can complete the payment within 30 days, but investors are betting on default. Contracts governing Russian borrowing almost always require payment in euros or dollars, with a few exceptions known as alternative payment clauses. Russia claims it meets these exceptions, but sovereign debt experts argue otherwise.

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“Russia has all the resources it needs to service its debt,” Kremlin spokesman Dmitry Peskov said. If so, they may be paid in rubles.” Sale – to raise funds that have exhausted the coffers of the state. Sanctions imposed on Russia this week have prevented the country from using its foreign exchange reserves held in U.S. banks to service its debt. Earlier, the Treasury Department allowed Russia to pay its debts and prevented Russia from defaulting when it sent the payment on March 17 last month.

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