Fitch Cuts Russia’s Rating to Junk, Says Default is ‘Imminent’

Fitch has downgraded Russia’s sovereign bonds by six notches to “C” from “B”, saying that a debt default is “imminent”.

The rating agency had already slashed Russia’s rating to a “junk” status of “B” on March 2, but said that developments since then appeared to have “further undermined Russia’s willingness to service government debt.”

“The ‘C’ rating reflects Fitch’s view that a sovereign default is imminent,” the agency said in a statement.

Fitch pointed to the Presidential Decree on March 5 which could potentially force sovereign debt payments meant to be paid in foreign currency to be redenominated into local currency. The Russian currency has lost nearly half of its worth since the year started.

“The further ratcheting up of sanctions, and proposals that could limit trade in energy, increase the probability of a policy response by Russia that includes at least selective non-payment of its sovereign debt obligations,” Fitch added.

Technical barriers to servicing debt, such as Russia’s partial ban from international financial messaging system SWIFT, also pose a certain degree of risk, the agency said.

Russia is due to pay $107 million in coupons across two bonds on March 16, but it has a 30-day grace period.

A default on a debt payment would be Russia’s first since 1998.

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