When Russia invaded Ukraine, the G7 countries decided to punish Russia without shooting its bullets and one of the ways it did that was to put sanctions on the country. The sanctions including financial considerations – if a bond was US payable, the Russians would have to use their internal mechanisms to pay the bond because the US put on a hold on their money outside of Russia. All countries have some money in other countries for diversification. The holds on the money outside of Russia caused concerns and worries and technically Russia defaulted on some bonds, because even though Russia had the money, the transfer agents could not allocate interest payments to the bond holders.
In an article by Alexander Marrow of Reuters, Russia had some options up its sleeves. In July the Russian President signed a law to give companies until the end of 2022 to issue bonds in a simplified procedure on the local market.
According to Ekaterina Nagaeva, director of the bourse’s listing department, they hope the first issue of bonds happen in late September. Replacement bonds would be a substitute for the Eurobonds that Russian companies can no longer service because of sanctions.
The bonds can be issued in rubles or in foreign currencies allow one term allows for the lender to demand repayment in rubles, rather than the foreign currency.
The Moscow Exchange is trying to go back to what was consider normal, but many investors will not be involved due to sanctions.
Linking to dividend paying stocks, events happen all over the world and companies must adapt to the events. The issue is how long does it take to adapt? In the case of Russia, their economy is based on oil and gas and prices went up which means there is money in the system. If there is money in the system adaption takes a little shorter time, in this case 6 months. When an event happens to your investments, you have to consider how long will the company adapt or is it best to seek other alternatives and watch the company on the sidelines till you believe it is adapting?
There are more questions than answers, till the next time – to raising questions.