S&P cuts Russia's foreign currency rating to 'selective default'

S&P on Saturday lowered Russia's foreign currency ratings to "selective default" on increased risks that Moscow will not be able and willing to honor its commitments to foreign debtholders, Report informs quoting from S&P.

Facing waves of sanctions over its invasion of Ukraine, Russia could face its first sovereign external default in over a century after it made arrangements to make an international bond repayment in rubles this week, even though the payment was due in dollars. read more

S&P said in a statement it understood that Russia had made coupon and principal payments on dollar-denominated Eurobonds in rubles on Monday.

"We currently don't expect that investors will be able to convert those ruble payments into dollars equivalent to the originally due amounts, or that the government will convert those payments within a 30-day grace period."

Sanctions on Russia are likely to be further increased in the coming weeks, the agency said, "hampering Russia's willingness and technical abilities to honor the terms and conditions of its obligations to foreign debtholders."

Russia has not defaulted on its external debt since the aftermath of its 1917 revolution, but its bonds have now emerged as a flashpoint in its economic tussle with Western countries.

A default was unimaginable until recently, with Russia rated as investment grade in the run-up to its Feb. 24 invasion of Ukraine, which Moscow calls a "special military operation".