Russian Default Imminent, CDDC Judges "Russia Failed Partial Interest Repayment"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Hyunwoo Lee] Concerns are rising that Russia could officially enter a default status within this month in the worst-case scenario, as it has reportedly failed to make partial interest payments on its bonds.

On the 1st (local time), the Credit Derivatives Determinations Committee (CDDC) under the International Swaps and Derivatives Association (ISDA) ruled that Russia failed to make partial interest payments. The CDDC is an organization that decides on the execution of contracts and compensation payments related to credit default swaps (CDS), a type of insurance against non-payment of bond interest and principal.

According to the CDDC, Russia missed the payment deadline for bonds maturing on April 4 but avoided an official default by making principal and interest payments just before the one-month grace period ended last month. However, the interest payment of $1.9 million (approximately 2.3 billion KRW) was reportedly not made. Accordingly, the CDDC ruled that bond investors can receive compensation under the CDS contracts.

This ruling on the partial interest payment failure was related to a small delayed interest amount, and since Russia has already repaid the principal of the bonds maturing in April, this ruling itself does not constitute an official default. However, Russia’s total bond and interest payments due this year amount to $2.5 billion, and with two interest payment grace periods expected to end by the 26th of this month, an official default declaration within this month is anticipated in the worst case.

Marcello Assalino, head of emerging market bonds at William Blair, said in an interview with the UK’s Financial Times (FT), "At least from the perspective of CDS, Russia appears to be in default," adding, "While a broad bond default by Russia has not yet been confirmed, it is highly likely that default will be confirmed during upcoming interest payment processes."

If Russia’s default is confirmed, investors holding $38 billion worth of dollar- or euro-denominated bonds issued by Russia could immediately demand payment resolutions and take legal actions to recover their investments.

This content was produced with the assistance of AI translation services.