Russia Defaults For First Time In 104 Years

[Economy 52,906]

https://oilprice.com/Geopolitics/International/Russia-Defaults-On-Foreign-Debt-For-The-First-Time-In-104-Years.html

 

Russia for the first time in 104 years has failed to make a debt payment on time to creditors and sanctions make it difficult to access foreign reserves

 

While Russia has the cash to pay creditors the sanctions make it nearly impossible to do so

[Economy 52,906]

On the one hand a default looks bad but on the other hand they get to keep their cash and the creditors are the ones screwed over

 

Considering the special circumstances of the default it has not caused a panic in Russian bond markets or financial crisis that would usually quickly follow a default because those that can still access Russian Markets don't consider them insolvant including Russian investors themselves who are the biggest lenders to their own government 

 

I feel like this is basically wiping away their debt payments and actually helps them???

 

 

[KORG 4,756]

It's the creditors that are out of pocket now, but wait until Russia needs credit again.... DENIED.

[Economy 52,906]

50 minutes ago, KORG said:

It's the creditors that are out of pocket now, but wait until Russia needs credit again.... DENIED.

Hopefully it actually has that impact but since Russia is not bankrupt and it is extenuating circumstances that blocked the payment...

 

Should there be a more stable or peaceful regime change this default is likely not to impact investor perception as much and thus not affect their ability to get liquidity as much as a default caused by bankruptcy and high debt normally would

 

In which case they get to miss the payment then suffer little consequences afterwards 

[KORG 4,756]

36 minutes ago, Economy said:

Hopefully it actually has that impact but since Russia is not bankrupt and it is extenuating circumstances that blocked the payment...

 

Should there be a more stable or peaceful regime change this default is likely not to impact investor perception as much and thus not affect their ability to get liquidity as much as a default caused by bankruptcy and high debt normally would

 

In which case they get to miss the payment then suffer little consequences afterwards 

It's all the great unknown but from an outside perspective... this extenuating circumstance appears to be long term. If I was an investor/creditor I'd jump ship.

[CommonWhiteGirl 1,039]

I'm pretty sure countries have credit ratings so even though they will get to keep the money in the short-term, this isn't good for them long term. It's kinda like missing a credit card payment and getting your credit score dinged... but with a whole country. Long-term it's bad for countries to do this because they are less likely to get loans in general and if they do manage to get a loan they'll be charged higher interest rates and they'll end up spending way more in the long run. 

Legally, there's nothing a company can do if a country defaults on a loan so Russia could literally just not pay it's creditors and no one could do anything about it. But, like I said before, getting loans in the future is going to be tough and it's going to cause tons of financial problems for their economy. 

[Economy 52,906]

15 hours ago, CommonWhiteGirl said:

I'm pretty sure countries have credit ratings so even though they will get to keep the money in the short-term, this isn't good for them long term. It's kinda like missing a credit card payment and getting your credit score dinged... but with a whole country. Long-term it's bad for countries to do this because they are less likely to get loans in general and if they do manage to get a loan they'll be charged higher interest rates and they'll end up spending way more in the long run. 

Legally, there's nothing a company can do if a country defaults on a loan so Russia could literally just not pay it's creditors and no one could do anything about it. But, like I said before, getting loans in the future is going to be tough and it's going to cause tons of financial problems for their economy. 

Yeah they have credit rating agencies but unlike banks that set their rates for customers these agencies don't set any rates just credit ratings, it influences perceived investability but ultimately what investors think is what really matters

 

So what I'm saying is, if Russia stabilizes, gets a new regime investors might reason the special circumstances that led to Russia's default no longer apply given that Russia does not have a high net debt load and the risk of future default would be minimal

 

So with that in mind, I think Russia will only suffer the consequences of this default down the Road if Putin remains in power (or is replaced by someone Simmilar).