Moody's downgrades Russia's rating from "B3" to "Ca"

Moody's Investors Service has downgraded the Government of Russia's long-term issuer (local- and foreign-currency) and senior unsecured (local- and foreign-currency) debt ratings to Ca from B3. The outlook is negative, Report informs referring to the agency.

This concludes the review for downgrade initiated on February 25. The local-currency Other Short-Term rating has remained unchanged at Not Prime (NP).

The downgrade of Russia's ratings was triggered by Moody's expectation that capital controls by the Central Bank of Russia (CBR) will restrict cross border payments including for debt service on government bonds.

"Moody's view is supported by a reported statement from the National Settlement Depository (NSD) that coupon payments on OFZ government bonds due on March 2 have only been paid to local holders of the papers, citing the CBR order prohibiting payments to non-residents," reads the report.

The downgrade to Ca is hence driven by severe concerns around Russia's willingness and ability to pay its debt obligations. Moody's view is that the risk of a default occurring has significantly increased.

The negative outlook reflects the significant risks to macro-economic stability posed by the imposition of severe and co-ordinated sanctions and the financial ramifications from delays to sovereign debt repayments and banking and corporate sector stress that are likely to have negative feedback loops for macro stability.