Moody’s Warns That Russia’s Bond Payments in Rubles Could Lead to Default

Russia’s repayment of foreign currency bonds in rubles could be considered a default if it does not reverse course and pay in dollars, Moody’s, the ratings agency, said on Thursday.

The warning from Moody’s comes as Russia is inching closer to its first failure to pay foreign debt since the 1917 Bolshevik Revolution, as President Vladimir V. Putin faces sanctions imposed by the United States and its allies in Europe and Asia in response to Russia’s invasion of Ukraine.

Moody’s said that Russia still has until May 4, when the grace period ends, to make the payments in dollars and avoid a default on two bonds that are maturing in 2022 and 2042. The payment terms of the original bond contracts required dollars and did not include a provision to allow for another currency.

“Moody’s view is that investors did not obtain the foreign-currency contractual promise on the payment due date,” the ratings agency said.

Earlier this week, S&P Global placed Russia under a “selective default” rating after the Russian government said last week that it had repaid about $650 million of dollar-denominated debt in rubles.

Russia has said that any default would be “artificial” because its foreign-currency reserves have been immobilized by the sanctions and argued that payments in rubles should be a suitable alternative.

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