Zürcher Nachrichten - Insurance payments on defaulted Russia debt to move forward

The Credit Derivatives Determinations Committee (CDDC) for Europe said it was scheduling an auction to settle credit derivate transactions on certain Russian government bonds on September 12.

Moody's ratings agency said in June that Russia defaulted on its foreign debt for the first time in a century, after bond holders did not receive $100 million in interest payments.

But as Western ratings agencies were no longer able to rate Russian debt under Western sanctions, an official determination on whether Russia had defaulted and therefore payment of insurance claims could go forward, fell to the CDDC.

Based in London, the CDDC is made up of 15 leading banks and financial firms that field requests from investors who want to know whether a missed debt payment constitutes a "credit event".

If they do so, they schedule a procedure called an auction to determine the price paid on credit default swaps, a sort of insurance bondholders can purchase to protect against default by borrowers.

The CDDC has since June been considering the case of Russia.

At the end of June it determined a credit event had indeed occured, but it did not launch the procedure for payment of credit default swaps as is it sought to ensure the payments were in compliance with Western sanctions.

Russian authorities have insisted throughout they have the funds to honour the country's debt, but Western sanctions prevented them from making payment in dollars as the bonds required.

Moscow called the predicament a "farce" and accused the West of pushing an "artificial" default.

Wednesday's statement triggered the auction process on eight Russian government bond issues.

The country last defaulted on its foreign debt in 1918, when Bolshevik revolution leader Vladimir Ilyich Lenin refused to recognise the massive debts of the deposed tsar's regime.

T.Furrer--NZN