Russian Railways JSC has been ruled in default by a derivatives panel after missing a bond interest payment, the first such decision since Russia was slapped with extensive sanctions that complicated financial transactions, Report informs referring to Bloomberg.
A failure-to-pay credit event occurred after a coupon due on March 14 failed to reach investors by the end of a 10-day grace period, according to the Credit Derivatives Determinations Committee.
The decision could set a precedent for the Russian government and local companies which have found themselves in a similar position. Since the beginning of the war in Ukraine, Western banks and other financial intermediaries have been blocking bond payments as they pored over legal implications of the sanctions, effectively shutting Russian borrowers out of the global financial system.
State-owned Russian Railways attempted to pay the bond coupon last month, but it failed to reach holders due to “legal and regulatory compliance obligations within the correspondent banking network.”
Contracts insuring the company’s debt against default will be triggered by the committee’s decision, and holders will now wait to see how much will be paid. The ruling doesn’t have a direct impact on bond investors, which so far haven’t requested an immediate repayment of their holdings.