S&P downgrades Russia’s foreign currency rating to selective default


S&P on Saturday lowered Russia’s foreign currency ratings to “selective default” amid heightened risks that Moscow will be unable and unwilling to meet its obligations to foreign creditors.

Amid a spate of sanctions over its invasion of Ukraine, Russia could face its first external default in over a century after making arrangements this week to make an international bond redemption in rubles despite the payment being due in dollars.

‘convert rubles’

S&P said in a statement that Russia made coupon and principal payments on dollar-denominated Eurobonds denominated in rubles on Monday.

“We do not currently expect that investors will be able to convert these ruble payments into dollars equal to the amounts originally due, or that the government will convert these payments within a 30-day grace period.”

Sanctions against Russia are likely to be tightened further in the coming weeks, the agency said, “hampering Russia’s willingness and technical ability to honor the terms of its obligations to foreign creditors.”

‘Everything possible’

Russia’s finance minister said Thursday the country will do whatever it takes to pay its creditors, but investors in Russia’s international bonds face an increasingly uncertain path to getting their money back if the country defaults.

S&P assigns a selective default rating when it believes the obligor has selectively defaulted on a particular issue or class of debt but will continue to make timely payments on other issues or classes of debt.

consequences of the revolution

Russia has not defaulted on its foreign debt since the 1917 revolution, but its bonds have now emerged as a focal point in its economic tussle with Western countries.

A default was unthinkable until recently, as Russia was classified as investment grade ahead of its Feb. 24 invasion of Ukraine, which Moscow calls a “military special operation.”

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