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Teetering on default, Russia misses $1.9 million payment, committee determines

Published

2 years ago

Farwa

Russia fails to pay $1.9 million in accrued interest on a dollar bond.
Failure expected to trigger payouts potentially worth billions of dollars.
Sanctions on Russia have excluded it from global financial system.

NEW YORK/LONDON: Russia’s failure to pay $1.9 million in accrued interest on a dollar bond will trigger payouts potentially worth billions of dollars, a panel of investors determined on Wednesday, as the country teeters on its first major external debt default in over a century.

Sanctions imposed by western countries and their allies on Russia following its invasion of Ukraine on February 24, as well as countermeasures by Moscow, have all but excluded the country from the global financial system.

The lapse last month of a key US license allowing Russia to make payments put the prospect of the country defaulting back into focus.

A Credit Derivatives Determinations Committee (CDDC) overseeing Europe, whose members are banks and asset managers, said on its website on Wednesday that it voted “yes” to a question on whether a “failure to pay credit event” occurred with respect to Russia.

Citibank was the sole “no” vote, while 12 other members voted “yes”.

Russia’s international 2022 bond matured on April 4 and payment of principal and interest due at maturity was not made until May 2. During that period, Russia was obligated to continue to pay interest which a holder calculated at $1.9 million.

The CDDC was then asked to determine if Russia’s non-payment constituted a failure to pay that would trigger payouts for insurance against a default, or credit default swaps (CDS).

The committee, whose members also include Goldman Sachs, Bank of America, Deutsche Bank, Elliot Management and PIMCO, agreed that the failure to pay happened on May 19 and that a request to find a resolution was submitted on May 26. Citi again voted ‘no’.

The committee will meet again on June 6 at 2pm London time (1300 GMT) to continue the process, which could move to set up an auction to determine any CDS payouts.

There are currently $2.54 billion of net notional CDS outstanding in relation to Russia, including $1.68 billion on the country itself and the remainder on the CDX.EM index, according to JPMorgan calculations.

A default for the purposes of CDS contracts “occurs once the determination committee votes for a credit event, which has now happened,” said Gabriele Foa, portfolio manager of the Global Credit Opportunities Fund at Algebris.

“Of course […] it is a very small amount, so the definition of default is very technical. If, as it seems, it is not possible for foreign investors to receive dollars starting May 25, the default will soon be more material.”

The focus for a wider default is now on a coupon payment due June 24 on a bond issued in 1998.

Russia has under $40 billion of international bonds outstanding and close to $2 billion in payments are due through year-end.

The country has the means to avoid default, with nearly $650 billion of available gold and currency reserves prior to the Ukraine invasion, which it calls a “special military operation”, and makes billions of dollars a week selling oil and gas.

Russia’s Finance Minister Anton Siluanov said last month that Moscow will service its external debt obligations in roubles if the United States blocks other options and will not call itself in default as it has the means to pay. Not all bonds allow for payment in roubles, however.

Russia has said it could extend a scheme used for its gas payments to sovereign bondholders, allowing Eurobond investors to open Russian FX and rouble accounts. The money would be channelled through Russia’s National Settlement Depository (NSD), which is not under Western sanctions.

Russian dollar-denominated bonds rose between 1 cent and 2.5 cents on Wednesday, Refinitiv data show. They are in the very distressed territory, ranging in price from 30 cents on the dollar to as low as 19 cents.

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Rainfall throughout the night stops flights in Lahore.

Published

18 hours ago

Farwa

Allama Iqbal International Airport experienced many hours of flight disruption due to the intense rainfall and windstorms that occurred overnight in Lahore, the provincial capital of Punjab.

Aviation sources claim that because of the monsoon weather, the flight operation was unable to operate between 3 and 4 am.

It is possible that the planes will arrive at the airport at 4 am.

Amidst delays in foreign airline flights, three aircraft made landings in Multan and Peshawar.

Riyadh flights arrived in Peshawar Airport, while flights scheduled to land in Lahore in Abu Dhabi and Bahrain ended up landing in Multan Airport.

Seven hours later than scheduled, the Qatar Airways flight from Doha arrived in Lahore.

Because of the bad weather, there are delays in the arrival and departure of numerous international planes.

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Containers were used to seal the Red Zone before JI’s sit-in at D-Chowk.

Published

18 hours ago

Farwa

Authorities in Islamabad have blocked off the Red Zone by erecting containers in front of today’s (Friday) Pakistan Tehreek-e-Insaf (PTI) demonstration and the Jamaat-i-Islami sit-in at D-Chowk in Islamabad.

Jamaat-i-Islami is scheduled to stage a sit-in at Islamabad’s D-Chowk, and the Pakistan Tehreek-e-Insaf (PTI) has declared a nationwide protest against the country’s soaring inflation and recent spike in electricity rates.

Containers have been used to block access to the Red Zone’s main crossroads, D Chowk, Nadra Chowk, and Sarina Chowk.

ISLAMABAD, PUNJAB SECTION 144

In the meantime, in response to PTI and JI plans for statewide rallies, the federal and Punjabi governments enforced Section 144 in Islamabad and Punjab. Section 144 will be in force from Friday, July 26 to Sunday, July 28, per the notification that was released in this regard.

Rallies, sit-ins, protests, and rallies are prohibited from July 26 to July 28, according to a letter from the Home Department. It said that terrorists may find public gatherings to be an easy target and stated that the decision had been made with the threat of terrorism in mind.

In contrast, JI Secretary General Ameerul Azeem claimed in a statement that police had raided the residences of JI officials across the nation.

In an attempt to break up the protest, he said, police had targeted JI leaders and activists. He also alleged that multiple instances of police raids, arrests, and harassment of women had occurred in various towns.

GOVT ADVISED

The government was forewarned by Jamaat Emir Hafiz Naeemur Rehman earlier on Thursday that it would face consequences if the party was barred from accessing Islamabad for their scheduled demonstration against inflation and an increase in electricity prices.

He stated in a statement that their belief is in peaceful political protest as a means of securing public rights. “We are not afraid of arrests, and the Jamaat-e-Islami cannot be stopped,” he added.

“The historic sit-in on Friday, July 26, will represent 250 million people of Pakistan, and we will sit peacefully at D-Chowk.”

According to the JI, convoys are in route from all around the nation to participate in the sit-in. He encouraged the administration to offer a location for the protest, highlighting that it is their constitutional and democratic right to speak up for the country.

“Any political party that wishes to participate” was invited, and he welcomed them all.

Prior to the sit-in, police raided the residences of JI leaders and officials in many parts of Punjab and Rawalpindi, making multiple arrests.

Ameerul Azim, the central secretary general of Jamaat-e-Islami, was not able to be arrested during the police raid; instead, Shaukat Mahmood, his driver, was taken into custody.

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Changes to Pakistan’s Test team could be significant for the Bangladesh series.

Published

18 hours ago

Farwa

Major changes to Pakistan’s team are anticipated ahead of the forthcoming Test series against Bangladesh, sources in Lahore have revealed.

As the team gets ready for the series, meetings with the players are planned for next week.

It is predicted that the Test squad would undergo several changes. The team’s lineup is expected to be strengthened by the likely inclusion of Muhammad Huraira. Key players like Faheem Ashraf, Wasim Jr., Saim Ayub, and Nauman Ali, whose contributions are vital to the team’s success, struggle to get a spot on the squad.

Furthermore, according to sources, Imamul Haq or Sahibzada Farhan are anticipated to be added to the team, subject to additional assessment. Furthermore, following a fitness assessment, Amir Jamal and Hasan Ali’s futures will be determined.

The ultimate selection for the Test team will take place following Red Ball head coach Jason Gillespie’s return to Pakistan. The ultimate squad that will play Bangladesh in the forthcoming Test series will be greatly influenced by his assessments and thoughts.

Pakistan is scheduled to visit New Zealand in March and April of 2025, according to the country’s official cricket schedule, which was released earlier this month.

Throughout their visit, the Pakistan cricket team will play three One Day Internationals (ODIs) and five Twenty20 Internationals (T20Is) in an exciting series.

The T20I series, which starts at Hagley Oval in Christchurch on March 16, will serve as the tour’s opening event.