Russian Railways First to Officially Default Due to Western Sanctions | Economy and business

For the first time since the start of the war in Ukraine, a Russian company has been officially declared in default on its debt after Western sanctions hampered Russia’s access to the global financial system.

State-owned Russian Railways failed to pay interest on $268 million in bonds due in March, leading the International Swaps and Derivatives Association (ISDA), a global financial committee which determines when the default insurance must be paid, to announce on Monday that the company is now considered in default.

The decision was made by ISDA’s Credit Derivatives Determinations Committee for the Europe, Middle East and Africa region, which said “a credit default event has occurred” in the part of a Swiss franc bond issued by RZD Capital to fund a loan for Russian Railways. .

The company for its part said on Tuesday that it had met its obligations but the money had not reached creditors because intermediaries had blocked payments due to sanctions against Russia, according to Bloomberg. Another Russian company, EuroChem, has missed payments for the same reason and is also technically in default.

The Russian government is heading for a similar situation after the United States blocked Russian government debt payments in US dollars from accounts at US financial institutions. Last week, Moscow went into technical default on two payments it attempted to make in roubles. Rating agencies described it as a technical default, although Moscow has a 30-day grace period to make the payments or it will officially default for the first time since 1998.