Russia makes early debt payment dash in bid to swerve default

RUSSIA initiated payment on 2 of its external bonds on Friday (May 20) in an attempt to stave off a looming sovereign default ahead of a key US licence allowing such transfers expiring next week.

The finance ministry said it channelled US$71.25 million on coupon payout for dollar-denominated Eurobonds maturing in 2026 and 26.5 million euros (S$38.6 million) on papers due in 2036.

Russia has faced the prospect of sovereign default since Western capitals imposed sweeping sanctions in the wake of its invasion of Ukraine on Feb 24 as well as Moscow introducing counter-measures. The country has been all but severed from the global financial fabric.

The 2 payments had been due on May 27, but Russia is relying on a licence by the US Treasury to be able to transfer the money to international bond holders - a key part of avoiding a sovereign default. That licence runs out on May 25.

Russia's national settlement depository had received the funds the ministry channelled, the finance ministry said.

It was unclear it the depository would be able to channel the funds itself so they could reach foreign holders of Russian Eurobonds.

JPMorgan, which previously acted as a correspondence bank on such payments, did not immediately respond to a request for comment.

Russian Finance Minister Anton Siluanov said on Wednesday that Moscow would service its external debt obligations in roubles if the United States blocks other options and would not call itself in default as it had the means to pay.

Despite the plethora of curbs, Russia has managed to make payments on 7 bonds since its invasion of Ukraine before the latest interest payments.

Russia has some US$40 billion of international bonds outstanding, around half of which are held by foreign investors. It has less than US$2 billion in payments related to its hard-currency bonds coming due until year-end. REUTERS