By Karin Strohecker
LONDON (Reuters) – A European debt agency has voted to class a bond issued by Russian Railways as being in default, marking the first time a Russia-originated debt instruments has been officially classified as defaulted since the country’s invasion of Ukraine.
The EMEA Credit Derivatives Determinations Committee, whose members include some of the world’s biggest investment banks, said on Monday it had decided a “failure to pay” credit event has occurred on Swiss franc loan participation notes linked to state-owned Russian Railways.
The loan participation notes due 2026 were issued by RZD Capital to finance a loan of 250 million Swiss francs ($268 million) to Russian Railways.
Western sanctions against Russia following the Ukraine invasion, which Russia says is a “special military operation”, have imposed strains on the Russian economy and raised questions about the possible default of many bonds issued by Russian corporations.
In turn this has raised the possibility of substantial writeoffs by Western lenders to Russia.
Bank of America, Goldman Sachs International and JPMorgan Chase Bank are some of the committee members who voted “yes” to the question on whether a failure to pay event occured on these assets. The committee met on April 8.
Russian Railways said it had attempted to make interest payments due March 14 but was unable to due to “legal and regulatory compliance obligations within the correspondent banking network,” according to an official notice posted by the SIX Swiss Exchange and referenced in the request to the committee.
($1 = 0.9335 Swiss francs)
(Reporting by Karin Strohecker; Editing by Jorgelina do Rosario and David Holmes)
