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On June 28, the government of Belarus issued a statement that Belarus will be servicing its Eurobond debt in Belarusian rubles because of its inability to pay in foreign currency as a result of Western sanctions.   

“This is a forced measure, the paying agent and participants of the clearing system could not guarantee to it that all Eurobond holders would receive the funds fully and in time,” the press service of the Council of Ministers of Belarus said in its statement.     

Belarus currently has five Eurobond issues with an outstanding amount of about USD 3.250 billion. The last time Belarus entered the Eurobond market was in June 2020, when it placed 5-year Eurobonds for USD 500 million at 5.875% and 10-year Eurobonds for USD 750 million at 6.378%.

More details:

For comparison: Ukraine in July and December of the same 2020 placed Eurobonds for USD 2.6 billion with maturity in 2033 at 7.253%. The comparison is not in favor of Ukraine.    

On June 29, the first payment was made in Belarusian rubles for the payment of interest on Eurobonds of 2027 (equivalent to USD 22.9 million). The funds were transferred into an account at ASB Belarusbank that could be accessed by the paying agent “Citibank N.A. London Branch”.        

As a result, on July 7, the Fitch rating agency downgraded the long-term rating of Belarus in foreign currency from CCC to pre-default C, which in fact means the beginning of default.

The grace period for this payment expires on July 13 (that is, today). If it is not done in accordance with the terms of the issue, then the Fitch agency will consider it a default and lower the rating to “RD” (Restricted Default).

Reference for comparison: on February 25, Fitch lowered the long-term rating of Ukraine from “B” to “CCC”.           

However, all this is of no fundamental importance. 

The above-mentioned actions of Belarus are a logical continuation of the history of the default of the Russian Federation. On June 27, the Moody’s rating agency announced Russia’s default as a result of the fact that investors had not received trapped interest payments for two issues of Eurobonds of USD 100 million (which were due on May 27). On June 27, the “grace period” expired. Russia defaulted for the first time since 1918.                

At the beginning of March 2022, the European Commission adopted a decision to prohibit transactions with the National Bank of Belarus to manage gold and foreign exchange reserves and to disconnect three Belarusian banks from SWIFT international financial messaging service.                               

Back in June 2021, the EU approved another package of sanctions against Belarus (due to the incident with the Ryanair plane), including additional restrictions on access to the capital markets of the European Union for the government of Belarus and state financial organizations.     

That is, in fact, Belarus was already cut off from international capital markets. Default was only a matter of time.

In general, it makes no sense to talk about any rating of Belarus, since it is not a subject literally. Unfortunately, this is just a launch pad for Russian missiles.

These two small countries did everything possible and impossible in order not to return to the circle of civilized states for a long time.           

According to Yaroslav Zhelezniak’s apt definition, default is a nail that keeps the lid on the coffin of the occupier’s economy. And where the occupier is, there is its “ground”.             

However, for Ukraine, as a victim of aggression, the issue of external debt restructuring (both under Eurobonds and before IFOs) is extremely urgent.