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

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  • 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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Massive power breakdown hits Pakistan

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  • Minister says power generation units are temporarily shut in winter at night.
  • Says frequency variation in national grid triggered outage.
  • Says ministry trying to restore power in next 12 hours.

LAHORE/KARACHI/QUETTA/ISLAMABAD: A countrywide power breakdown, triggered by a “frequency variation” in the national grid early Monday morning, has left large parts of the country including Karachi, Lahore, Islamabad, Peshawar and Quetta without electricity. 

Power Minister Khurrum Dastagir, while talking to Geo News, said that the power generation units are temporarily shut down in winter at night as an economic measure to save fuel costs.

“When the systems were turned on at 7:30am this morning one by one, frequency variation was reported in the southern part of the country between Jamshoro and Dadu. There was a fluctuation in voltage and power generating units were shut down one by one due to cascading impact. This is not a major crisis,” said the federal minister as the country plunged into darkness for the second time in four months.

The minister said that his ministry has started restoring some grid stations in Tarbela and Warsak. 

“Peshawar Electric Supply Company (PESCO) and some grids of Islamabad Electric Supply Company (IESCO) have already been restored,” claimed the minister.  

Talking about the breakdown in Karachi, the minister said that the matter in the port city is complicated as it has a complete electric supply system.

A shopkeeper speaks with a customer (not pictured) at a medical store during a country-wide power breakdown in Karachi, Pakistan January 23, 2023. — Reuters
A shopkeeper speaks with a customer (not pictured) at a medical store during a country-wide power breakdown in Karachi, Pakistan January 23, 2023. — Reuters

“We provide K-Electric about 1,000-1,100 megawatts routinely, however, it will be restored within a few hours. It is not certain how long will it take to sort this issue. However, my target is to restore electricity in the country in the next 12 hours,” said the minister. 

Before the energy ministry’s announcement, different power distribution companies had confirmed the breakdown.

According to Quetta Electric Supply Company (QESCO), the two transmission lines have tripped leaving 22 districts of Balochistan, including Quetta without power.

Karachi power update

Meanwhile, K-Electric spokesperson Imran Rana said that at approximately 7:34am today, the national grid experienced a loss of frequency, affecting the power supply to multiple cities across Pakistan

“This has also cascaded to KE’s network affecting power supply to Karachi,” Rana said, adding the KE’s network is safe and protected.

“Our teams are actively monitoring the situation and enabling restoration efforts.”

An IESCO spokesperson said that its 117 grid stations were without electricity.

Meanwhile, PESCO also confirmed the outage in areas where it supplies electricity. 

This is the second time within four months that a country was hit by a major power breakdown.

NEPRA takes notice

The National Electric Power Regulatory Authority (NEPRA), in a statement, said that it has taken “serious notice” of the power outage and directed the National Transmission & Despatch Company (NTDC) to submit a “detailed report”.

The statement also said that the regulator has previously imposed fines on similar outages in the 2021 and 2022. It also shared that NEPRA has consistently issued directives and recommendations on tackling such events in future.

Previous breakdown 

In October of last year, Karachi, Hyderabad, Sukkur, Quetta, Multan, and Faisalabad were hit by a power outage.

At that time, the power minister said that nearly 8,000 megawatts of power went offline.

Back then, Dastagir had said that the simultaneous faults in two power lines, which had triggered the breakdown, at the same time was concerning for the government. He had also announced that an in-depth inquiry was ordered and promised action.

A timeline of power breakdowns in Pakistan

The country’s generation and distribution network has suffered eight major power breakdowns during the last nine years.

In 2014 and 2017, nationwide blackouts were caused by a fault in Tarbela Power Station while fog, frequency variation and the Guddu Power Plant fault were blamed for breakdowns in 2015, 2018, 2019, 2021, 2022 and 2023.

Every time the party in power announced to conduct a comprehensive probe and vowed to rectify the issues but nothing has happened despite multiple inquiries.

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Punjab ordered to issue divorce certificates to non-Muslims

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  • Lahore High Court directs provincial authority to frame rules within 90 days.
  • Petitioner says issue is faced by many members of Christian community.
  • NADRA’s Registration Policy allows change of marital status on basis of affidavit.

The Lahore High Court (LHC) Wednesday directed the Punjab government to frame, within 90 days, rules under which union councils would issue divorce certificates to members of Christian and other non-Muslim communities in Pakistan.

In many parts of the country, the divorce certificates are not issued to non-Muslims by union councils that instead claimed such certificates were “not issued to the Christian community.” This is an issue for members of the said community because, without a divorce certificate, they cannot request the National Database and Registration Authority (NADRA) to update their marital status while applying for the renewal of their identity cards.

The matter was brought to the attention of the LHC during the case Shumaila Sharif vs the secretary union council etc.

The petitioner in her appeal requested that the court is a writ of Mandamus — an order from a court to an inferior government official ordering the government official to properly — against the relevant union council and direct it to issue her the divorce certificate.

The case proceedings

The petition was heard on December 16 last year and the presiding judge was Judge Tariq Saleem Sheikh.

During the proceedings, the counsel of the petitioner, Advocate Umar Saeed, said that the issue was faced by several people in the Christian community and was not a one-off incident.

Citing Section 33 (1)(j) of the Punjab Local Government Act 2022 (PLGA 2022) — which mandates that union councils ensure registration of births, deaths, marriages and divorces for all the communities without discrimination — and Article 36 of the Constitution, which expressly requires the state to protect the minorities’ legitimate rights and interests, the counsel argued that by refusing to issue the requisite certificate, the council was failing to fulfil its legal duty.

Additionally, Advocate Kashif Alexander, the court’s amicus curiae on the matter, contended that obtaining a divorce certificate is a legal right that cannot be denied.

Together the two emphasise that while the Constitution of Pakistan (1973) does not explicitly guarantee the right to identity, Article 9 (right to life) and Article 14 (dignity of man) safeguard that right. Therefore, any citizen whose marital status changes due to the dissolution of marriage by divorce has a fundamental right to obtain a divorce certificate from the competent authority and then have their CNIC updated/revised.

The Additional Advocate General has little to defend the respondents and said that the provincial government was taking steps to address the complaints of the Christian community regarding the non-issuance of divorce certificates.

The verdict

During the proceedings, it was brought to the court’s attention that NADRA’s Registration Policy dated 06.04.2021 (Version 5.0.2) allowed a change of marital status of a divorcee on the basis of an affidavit in the prescribed form.

In light of this, the court directed that until the provincial government framed the requisite rules needed for the issuance of the divorce certificate by the union council, NADRA shall accommodate the Christian community in accordance with the Registration Policy 19.

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Anchor Mishal Bukhari passes away at 38

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Mishal Bukhari, a renowned journalist and anchorperson, has passed away at the age of 38 after battling cancer for two years, Daily Jang reported. 

The news of Mishal’s demise was announced by her husband, Ameer Abbas, who is also a renowned anchorperson, on Twitter. 

“My wife, journalist Mishal Bukhari, a beautiful heart, an incomparable personality, an incredibly patient, unbelievably brave woman, left an unbearable shock after fighting cancer for two years,” Abbas wrote.

The funeral prayers of the journalist will be held at 1pm in Jamia Masjid-al-Muntazir in Lahore today.

Mishal, who was an award-winning broadcast journalist, was born on  July 8, 1984, in Karachi. She started her career as a news anchor on a private TV channel. She also worked for Pakistan Television.

The news of her sad demise triggered an outpour of reactions from fellow journalists and politicians, who offered their condolences.

“Remembering #mishalbukhari our host #AppTV who lost battle against cancer in Lahore on Tuesday evening. Thoughts of our team members with whom she worked are with her parents, family,” wrote Rauf Klasra.

Former deputy speaker Qasim Khan Suri offered condolences and prayed for the departed soul and her family members. 

Maritime Affairs Minister Faisal Subzwari prayed for the family members and the deceased journalist. 

Columnist Dr Shahid Masood also offered his condolences and prayers. 

Pakistan lost another journalist at the very outset of 2023 after 2022, a year riddled with several tragic deaths including senior Pakistani journalists. The last year saw the shocking deaths of famous televangelist Aamir Liaquat Hussain, anchorperson Arshad Sharif and Jang Press president Imran Aslam.

In July 2022, the news of sudden death of Hussain sent shock waves across the country. This was followed by the tragic death of Sharif, who was shot dead in a case of “mistaken identity” by Kenyan police in Nairobi in October.

Later in December, Aslam, a giant of journalism, passed away during the course of treatment at a local hospital.

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