Coupon payment… As of yesterday, the one-month grace period for the coupon payments dated May 27 has ended and these bonds are considered to be in default. It is stated that these amounts are not transferred to the account of the lenders, since international banks do not perform dollar or other hard currency transfers and payments in rubles are not accepted, and therefore technically there is a default situation on the three related bonds of Russia (a total of 100 million dollars coupon payment)
The grace period and the issue of default… Russia's local currency default in 1998 had a huge impact on financial markets. Today's situation does not create such a big agenda or additional risk perception, as it manifests itself as the officialization of certain actions. By rule, a bond has a 30-day grace period after the coupon payment is missed. When the grace period expires, the payment is not made and therefore the related bond is in default.
Russian government Eurobonds… These are the bonds marked in yellow above, which had coupon payments last month and for which the coupon payment was missed because the banks did not transfer dollars. Source: Bloomberg
Conclusion? It is not possible for Russia to obtain funds from the IMF or international markets under these sanctions conditions. Therefore, the default of existing bonds does not present a new effect for a government that cannot make foreign borrowing in dollars or euros. Russia intends to pay for these bonds in rubles, but international lenders do not accept this form of payment. Due to the Swift ban, it is not possible to transfer dollars to foreign banks. However, of course, for bond investors lending to Russia, not being able to receive coupon payments is a problem, and there will be problems in principal and interest payments for near-term bonds. Even if the war is over, a serious restructuring will be required for retroactive payments. The fact that the US has lifted the payment exception to Russian bond holders will also pose a problem in this regard. Going around sanctions can result in sanctions or penalties for third parties other than the US and Russia.
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