Russia halts payments on bonds, shares to foreigners

Interest payments to foreign investors holding Russian government bonds will be temporarily suspended, the country’s Central Bank announced on Wednesday. The move comes after some $400 billion of the nation’s reserves were frozen abroad as part of sanctions over the invasion of Ukraine.

Coupon payments for foreigners holding ruble-denominated sovereign debt (or OFZs) have been banned, and Russian companies have also been prohibited from paying dividends to overseas shareholders. The Central Bank did not specify how long the suspension, which doesn’t apply to domestic investors, would last.

The measure is aimed at preventing the withdrawal of funds from the financial market and mass sales of Russian securities, the media has reported, citing a statement from the regulator’s press service. A ban on the writing-off of securities from the accounts of foreign investors has also been introduced.

On Wednesday, Russia was due to pay a 6.5% coupon on an OFZ due to mature in February 2024 and the next payment on hard currency debt, coupons on two Eurobonds, is due in two weeks’ time, according to Reuters.

Earlier, RBC reported that foreign investors would not be able to receive interest on the Eurobond issue due to the US sanctions against Russia.

Russian banks and companies hold $391 billion in outstanding external debt as of October 1, 2021, Reuters said, citing Dmitry Polevoy from Locko-Invest investment bank.

On Tuesday, Russian Prime Minister Mikhail Mishustin said Moscow was temporarily blocking foreign investors from selling Russian assets to ensure they take a considered decision, not one driven by political pressure.

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