Ussia’s state railway operator has long used an Irish corporate structure, RZD Capital PLC, to raise finance in international markets, including the bonds currently in question.
The bonds are listed on the Dublin Stock Exchange, so although underwriting and syndication for investors is usually done by investment banks in London, these contracts are subject to under Irish and EU law.
An interest payment of 23 million euros is due on Sunday, but Russian holidays have pushed the expected payment date back to March 9. Bonds typically have a grace period, usually lasting one months, after the interest payment is due before the borrower is considered. as default. In the case of Russian Railways 45 days.
The domicile of the bond issuer means that any legal action by the bondholder, in the event of an unlikely default, could therefore be taken in Ireland but not in Russia.
Ratings agency Fitch warned in December that a missed payment would have lasting consequences not only for borrowers but also for the Russian economy.
At the time, it gave Russian Railways a rating of BBB, indicating that the possibility of default was remote, in part because of its close relationship with the Russian government.
However, Fitch said if a default occurred, it would negatively affect Russia’s long-term development as the railway operator partly relies on debt to finance infrastructure projects. .
On Thursday, Bloomberg reported that bondholders said there was no indication the funds would arrive. They declined to be identified because they were not authorized to speak publicly about the matter.
The operator of everything from local trains to the Trans-Siberian railway will be the first Russian company to default on debt payments in foreign currency since President Vladimir Putin decided that investors in the so-called are hostile countries will be paid only in rubles.
Lenders outside Russia will probably consider the ruble payment invalid and sanctions It may even make it difficult to pay.
Bloomberg Supplemental Report
