Aurelia Butler

Russia’s finance ministry said on Monday it had sent an order to a correspondent bank for the payment of coupons on eurobonds amounting to $117.2 million which are due on Wednesday.The diplomatic standoff and economic curbs have sparked questions over whether and how Russia will make the payment, raising the spectre of its first major external debt default since 1917, when Bolsheviks failed to recognise Tsarist debt in the wake of the revolution. Here is what we know and do not know about Russia’s debt and its repayment: HOW MUCH DOES RUSSIA OWE IN HARD CURRENCY BONDS? Russia has 15 international bonds with a face value of around $40 billion outstanding, around half of them held by international investors. The coupons on March 16 are the first of several, with another $615 million due over the rest of the month. The first principal payment is due on April 4 when a $2 billion bond matures.The bonds themselves have been issued with a mix of terms and indentures. Bonds sold after Russia was sanctioned over its 2014 annexation of Crimea contain a provision for alternative currency payments. For bonds listed after 2018, the rouble is listed as an alternative currency option.The bonds linked to Wednesday’s coupon payment were listed in 2013 and are to be paid in U.S. dollars, with Citi as the paying agent.Fitch Ratings said on Tuesday that if the payments were done in roubles, it would constitute a sovereign default if not corrected after a 30-day grace period.According to the bonds’ prospectus, payment in other currency would only be effective after the recipients exchange that currency amount for dollars, and at the dollar amount recoverable in the open market.Citi declined to comment.WILL MOSCOW PAY?Sanctions have been biting hard, especially the freezing of the central bank currency reserves, with Moscow initially balking at the prospect of sending scarce hard currency to foreign investors. A presidential decree on March 5 announced that Russian debtors have the right to pay foreign creditors in roubles and by putting their funds in a Type C account at the national depository. However, the central bank and finance ministry can make exceptions. Subsequent statements have been more nuanced and seemingly allow hard currency payments. The finance ministry said in a statement https://minfin.gov.ru/ru/press-center/?id_4=37805-utverzhden_vremennyi_poryadok_ispolneniya_gosudarstvennykh_dolgovykh_obyazatelstv_rossiiskoi_federatsii_v_inostrannoi_valyute on Monday that it had approved a temporary procedure to make FX payments and that Russia would fulfil obligations “in a timely manner and in full.”However, if foreign banks fail to execute the payments, Russia could withdraw the funds and pay them in roubles into an account at the national depository. WILL INVESTORS BE ABLE TO RECEIVE THE MONEY? Sanctions from both sides mean it has become more complicated for Russia to transfer the funds, but also for foreign investors to receive them. The U.S. Office of Foreign Assets Control (OFAC) issued general license https://home.treasury.gov/system/files/126/russia_gl9a.pdf 9A on March 2 which authorizes transactions for U.S. persons with regards to “the receipt of interest, dividend, or maturity payments in connection with debt or equity” issued by Russia’s finance ministry, central bank or national wealth fund. However, that exemption runs out on May 25 with Russia due to pay nearly $2 billion on its external sovereign bonds after that deadline and until year-end. WHAT IS THE PROSPECT OF A RUSSIAN DEFAULT? A Russian external debt default seemed unthinkable with its international bonds trading above par until well into February. Harsh sanctions have changed all that and now bonds hover at distressed levels, some barely at a tenth of their face value. Most payments due – like the one on Wednesday – have a 30-day grace period during which Russia has time to make the payment. Some issues have a 15-day grace period. Unlike some of Russia’s other external bonds, which have alternative payment provisions in the small print, the coupons due on Wednesday have to be paid in U.S. dollars.Failure to pay them in full or paying in another currency would lead to a default by the end of the grace period, according to analysts. WHAT WOULD BE THE CONSEQUENCES OF A DEFAULT?Countries in default have no access to international capital markets, though given current restrictions, Russia is shut out of markets anyway. However, a default could have consequences far and wide.It could trigger Russian debt default insurance policies known as Credit Default Swaps (CDS) that investors take out for this kind of situation. Investment bank JPMorgan (NYSE:JPM) estimates there are roughly $6 billion worth of outstanding CDS that would need to be paid out.Furthermore, it is not just international asset managers who are exposed to Russia’s external debt. “Many Russian investors bought this paper via their accounts in Western banks,” said Evgeny Suvorov, Russia-based economist at CentroCredit Bank. “There is a large suspicion that it’s specifically Russian investors that are the main bondholders of sovereign external debt.”Russian banks could also be in trouble with the bonds making up part of their capital buffers. Being under the jurisdiction of a defaulted sovereign adds to pressure on Russian corporates, which have frequently used international capital markets to raise financing and have nearly $100 billion in hard currency bonds outstanding. More

WASHINGTON (Reuters) -The U.S. government will run out of supplies of COVID-19 treatments known as monoclonal antibodies as soon as late May and will have to scale back plans to get more unless Congress provides more funding, the White House said on Tuesday.Raising the alarm about depleted funding for the U.S. pandemic response, the White House said the government also would not have enough money to provide additional COVID-19 booster shots or variant-specific vaccines without a new injection of cash.The White House has requested $22.5 billion in immediate emergency funding to fight the pandemic, but, after objections from Republicans and some Democrats, the money was removed from the latest government funding bill passed by lawmakers last week.White House spokesperson Jen Psaki said there would be “dire” consequences if the funding did not come through.”With cases rising abroad, scientific and medical experts have been clear that in the next couple of months there could be increasing cases of COVID-19 in the United States as well,” she told reporters. “Waiting to provide funding until we’re in a worse spot with the virus will be too late. We need funding now so we’re prepared for whatever comes.” An administration official, speaking on condition of anonymity, said the government had planned to put in an order with AstraZeneca (NASDAQ:AZN) on March 25 for what would likely have been hundreds of thousands of doses of monoclonal treatments. That order would have to be scaled back or scrapped without new funds, the official said.”We’ll likely run out of these treatments for our most vulnerable … Americans by the end of the year if not sooner,” the official said. “Without additional funding soon, thousands of patients could lose access to treatments and these companies will have little incentive to continue investing in the development and manufacturing of these treatments.”A program that reimburses medical providers for providing COVID testing, treatments and vaccines to uninsured people will have to be scaled back in March and shuttered in April without additional funding, the White House said.President Joe Biden is scheduled to sign the larger funding bill without the emergency pandemic relief on Tuesday afternoon. Republicans objected to the additional aid, arguing that it was not needed, while Democrats did not like how it was going to be distributed. The money was to be used for research and to stockpile vaccines for possible future spikes in COVID-19 infections.Lawmakers plan to revisit the matter in separate legislation.There have been more than 972,000 COVID-19 deaths and more than 79.6 million infections recorded in the United States – the most in the world – since the pandemic began in 2020, according to Reuters data.The call for funding comes as precautionary measures against COVID-19, including mandatory mask requirements, have been lifted across the country, with cases decreasing and Americans relishing a return to some form of normalcy.But the White House has said other COVID-19 variants may come. It said on Monday that the Omicron BA.2 sub-variant had been circulating for some time, with roughly 35,000 current cases and more expected. More

LONDON (Reuters) – Rules forcing Britain’s banks to wrap their retail arms with a bespoke cushion of capital should be retained for now, though they could “ossify” the sector in the longer term if left unchanged, an independent review for the finance ministry said on Tuesday.The’ring-fencing’ rules were introduced for banks with deposits of over 25 billion pounds ($32.6 billion) to insulate accounts from any blow-ups in separate investment banking activities, a lesson from the financial crisis when taxpayers had to bail out banks.Banks wanted the rules, applied by seven lenders, including HSBC, Barclays (LON:BARC), Lloyds (LON:LLOY) and NatWest, to be dismantled, saying they risk harming competitiveness.The review, chaired by Keith Skeoch, said the rules have improved resilience of retail banking, though they need to be more adaptable for simpler lenders.The 25-billion-pound threshold should remain but its application made more flexible so that less complex banks would be exempt from ring-fencing, even if they hold deposits above this amount, the review said.”Ring-fencing has to date had some impact on banking competition and competitiveness but has not been the main driver in any of these areas,” the review said.”In the longer term, there is a risk that retail banking in the UK ossifies and remains focused on addressing the risks and opportunities of the past, rather than being able to adapt to address the risks and opportunities identified in the future.”The benefits of ring-fencing will diminish with time as separate ‘resolution’ rules for dismantling a failing bank and moving accounts to another lender, become embedded.As regulators become comfortable with the ability of the resolution rules to work well, they will also become confident in continuity of retail services without the structural separation of ring-fencing, the review said.”Our main recommendation would change the scope of the regime in the longer term by giving the authorities more flexibility and a new power in their toolkit to remove banks from the ring-fencing regime that are judged to be resolvable,” Skeoch said in the review’s foreword.($1 = 0.7668 pounds) More