May 26, 2022

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S&P says Russia is ‘selectively’ default on foreign currency payments

Financial rating agency S&P Global Ratings downgraded Russia’s foreign exchange reserves on Saturday. “Selected Default”After Moscow settled a dollar debt in rubles earlier this week.

The agency’s valuation of payments in foreign currencies, such as the dollar, is reduced “SD”When there is reference “CC” It also announced that it would immediately suspend its assessment of Russia in accordance with EU requirements, according to a press release issued by the agency, for payment in rubles. At the agency level it is only one foot lower than the SD: rating “D”To default.

“We do not believe that investors will be able to convert these ruble payments into dollars equal to the first installment, or the government will convert these payments within the thirty-day grace period.”S&P says.

The company hopes that sanctions against Russia will strengthen in the coming weeks “Prevents Russia’s willingness and technical capabilities to respect the terms and conditions of its obligations to foreign borrowers”.

Like all states, Russia borrows in the form of bonds, often in dollars, and has to repay the capital with constant interest. They can be investors in a country, states, financial institutions (such as the International Monetary Fund and the World Bank) or in the financial markets. When the State does not repay a portion of its obligations, it defaults to the default portion.

For weeks, Russia has been blocking the risk of repaying debt, as the U.S. Treasury has allowed the use of foreign currency held by Moscow abroad to settle foreign debt. In March, Russia paid interest in several installments, revealing its willingness and ability to repay.

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But the United States has not authorized Russia to repay the debt with dollars it has held in US banks since Monday. As a result, JPMorgan, which operated as a reporter bank, stopped making payments.

As a result, the Russian Ministry of Finance announced on Wednesday that the settlement of nearly $ 650 million rubles due on April 4. The three major rating agencies, S&P, Fitch and Moody’s, act as arbitrators to declare a country default. But Fitch and Moody’s have already dropped credit ratings by state and Russian companies within the framework of sanctions against Moscow. S&P Global Ratings is expected to suspend ratings by April 15, but finally announced its immediate suspension on Saturday.