Sign up now for FREE unlimited access to Reuters.com Register LONDON, April 11 (Reuters) – Investors on Monday approached a possible $ 1 billion debt default payment issued by the Russian government and its entities as the country is on the brink of its first external bankruptcy in more than a century. The EMEA Credit Derivatives Committee (CDDC) ruled Monday that Russia’s state-owned Railways does not pay bonds, a key step in activating the so-called Credit Default Swaps (CDDs) – a means of safeguarding default risk. The ruling, which marked the first time a Russian debt official was officially declared bankrupt after the country’s invasion of Ukraine, has been closely watched by creditors waiting to see if the country’s public debt could follow suit. Sign up now for FREE unlimited access to Reuters.com Register Just hours later, the same commission was asked if there was a possible default on hard currency bonds issued by the Russian government. read more The CDDC, whose members include some of the world’s largest investment banks, said Monday it had decided on an “insolvency” credit for Swiss franc bonds linked to Russia’s state-owned Railways. Loan bonds maturing in 2026 were issued by RZD Capital to finance a loan of 250 million Swiss francs ($ 268 million) to Russian Railways. There are $ 21.1 million worth of pure CDS on 17 contracts pending for Russian Railways, according to IHS Markit. Western sanctions against Russia following the invasion of Ukraine, which Russia says is a “special military operation”, and Moscow’s countermeasures have put pressure on the Russian economy and raised questions about the possible bankruptcy of many bonds. issued by Russian companies. Bank of America (BAC.N), Goldman Sachs International (GS.N) and JPMorgan Chase Bank (JPM.N) are some of the members of the committee who voted “yes” to the question of whether a failure occurred payment on Russian Railways. The committee met on Friday. Some analysts see this as a test case for whether a solvency issuer that could not make the payment due to sanctions is considered a default. “Obviously the CDDC is saying yes … and it probably means that it will end up with something similar to the Russian sovereign trying to pay for a US dollar coupon – but it is failing,” said a source, speaking on condition of anonymity. A spokesman for UBS AG, the banknote payment representative, declined to comment. Russian Railways, which operates both freight and passenger trains along thousands of miles of railways, said it had tried to make interest payments ending March 14 but was unable to do so due to “legal and regulatory compliance requirements within the responsive banking network.” ». in an official statement issued by the SIX Swiss Exchange referring to the request to the committee. While outstanding CDS on Russian Railways are relatively limited, there are currently $ 3.43 billion in pure fictitious CDS in Russia to settle, investment bank JPMorgan said in a note Monday. The issue of Russian sovereign debt is pending the approval of the nomination committee and no meeting date has been set, according to its website. Russia could face its first sovereign foreign bankruptcy in a century after making arrangements to repay its international ruble bond last week, even though the payment was in US dollars. Russia’s Finance Minister Anton Siluanov has said the country will take legal action if the West tries to force it to default on its public debt. read more ($ 1 = 0.9335 Swiss francs) Sign up now for FREE unlimited access to Reuters.com Register Report by Karin Strohecker. Edited by: Jorgelina do Rosario, David Holmes, Jonathan Oatis and Chizu Nomiyama Our role models: The Thomson Reuters Trust Principles.
