Fitch Ratings classifies Russia's redemption of dollar government bonds in rubles as a sovereign default, Report informs referring to Fitch’s website.
“According to Fitch Ratings’ Sovereign Rating Criteria, the payment in local currency of Russia’s US dollar Eurobond coupons due on March 16 would, if it were to occur, constitute a sovereign default, on expiry of the 30-day grace period,” Fitch noted.
Such a forced redenomination of payment obligations would be consistent with Fitch’s downgrade on March 8 of Russia's Long-Term Foreign-Currency Issuer Default Rating (LT FC IDR) to 'C', indicating that a default or a default-like process has begun.
In line with Fitch’s criteria, the affected issue ratings would be lowered to ‘D’ and the LT FC IDR would be lowered to ‘Restricted Default’ if the coupon payments are not made in US dollars as per the original terms, by the end of the grace period.
Similarly, Russia’s Long-Term Local-Currency IDR of ‘C’ is consistent with the failure to credit non-resident investors with the local-currency OFZ coupons that were due on March 2.
“We understand that Russia’s Ministry of Finance made these coupon payments on the 2024 OFZs to the National Settlement Depository, but they were not paid on to foreign investors because of Central Bank of Russia restrictions. This will constitute a default if not cured within 30 days of the payments falling due. Fitch is applying this 30-day grace period despite an absence of OFZ documentation that confirms the detail of any grace period,” reads the message.
Fitch earlier said it downgraded Russia's Long-term foreign currency IDR to 'C' from 'B' in light that further tightening of international sanctions and proposals that could restrict energy trade increase the likelihood of a Russian political reaction that includes at least partial non-payment of their debt obligations.