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Sovereign debt defaults12/17/2023 Professor Braga initiated the dialogue by drawing attention to Argentina’s ongoing experience. Judge Griesa called the new proposal “illegal,” which made it difficult for investors and financial intermediaries to participate without risking being held in contempt of court. This was to circumvent the order of US District Judge Thomas Griesa to block the country from making a US$539 million interest payment until it had fully repaid approximately $1.6 billion to the holdout hedge funds (which had rejected previous bond restructurings). The audience was asked to vote on three related questions before and after the dialogue.Īrgentina was still in the eye of a sovereign debt storm when it passed new legislation on 11 September 2014 on paying foreign bonds through a local trustee - thereby replacing the Bank of New York Mellon Corp - and offered investors the chance to swap previously restructured debt for bonds issued under Argentine law. “It feels like garnish and a dressing on top of a very ugly and profound set of circumstances,” said Anna Gelpern, a Georgetown Law professor who specializes in sovereign debt.About 39 executives, academics and representatives from governments attended a stimulating debate organized by the Evian Moderated by Professor Braga, a panel of speakers discussed whether the Argentine default experience could have pervasive implications for future sovereign debt restructuring. Ultimately, the market will determine whether Russia is worthy of credit, and its actions in Ukraine and future sanctions will determine the fate of its economy. Investors have been anticipating a default since late February, and policymakers have suggested that a default does not pose a threat to the stability of the financial system. Samples said.ĭespite the symbolism of a default, the economic implications for Russia and the world could be relatively small.Įconomists estimate that Russia’s total foreign public debt amounts to about $75 billion, while Russia’s annual energy sales are worth about $200 billion. “I do expect them to stick to their own alternative facts,” Mr. He predicted that Russia would look for creative ways to avoid acknowledging a default, such as pointing to arcane language in bond contracts that could be interpreted to allow for payments in other currencies or by seeking a friendly court jurisdiction, perhaps in Russia. That is when American bondholders will no longer be able to accept Russian debt payments under a temporary exemption that the Treasury Department has allowed. Russia can still make payments on Russian sovereign debt as long as it is not trying to use funds from Russian government accounts that are held in American financial institutions.Īfter the grace period on the foreign currency bond payments expires on May 4, the next key moment will be May 25. That new restriction was intended to force Russia to choose between draining the remaining dollar reserves it has in Russia or using new revenue ( from natural gas payments, for example) to make bond payments and avoid defaulting on its debt. ![]() The Biden administration put additional pressure on Russia earlier this month when the Treasury Department started blocking Russia from making debt payments using dollars held in American banks. ![]() ![]() A Fitch spokesman said he could not offer any comments on Russia’s creditworthiness in light of the sanctions. Spokesmen from Moody’s and S&P did not comment. But it is not clear how the ratings agencies will weigh in if Russia fails to make payments after its grace periods run out because of European Union sanctions that have restricted the agencies from rating Russia.
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