Russia failed to meet its obligations to creditors when it didn’t make a small interest payment in April, according to an industry body overseeing the derivatives market, a ruling that triggers some $2.2 billion in credit-default swaps, WSJ Pro Bankruptcy reported. Wednesday’s decision marks the first formal recognition within financial markets of a Russian debt default after its invasion of Ukraine caused the U.S. and its allies to impose broad financial sanctions, severing Moscow’s access to foreign bank accounts and global payment systems. Russia failed to include roughly $1.9 million in accrued interest when it made a 28-day late payment on a $2 billion sovereign bond in April, which the Credit Derivatives Determinations Committee said amounts to a failure-to-pay event. The missed payment won’t trigger a cross-default on Russia’s other bonds, since the country’s foreign-currency debts require nonpayment of at least $75 million for cascading defaults to occur. But it triggers credit-default swaps that act as insurance against nonpayment, putting investment firms that sold default protection on the hook to swap holders. Pacific Investment Management Co. has been among those writing insurance, with more than $1 billion in long positions on the Kremlin’s creditworthiness in the firm’s mutual funds, according to securities filings.
