Rating agency Moody’s lowered Russia’s credit rating on Sunday to the second lowest in its scale, citing central bank controls on capital that potentially restrict payments on the country’s external debt and lead to defaults.
Moody’s said its decision to downgrade Russia’s credit rating was “driven by serious concerns about Russia’s willingness and ability to service its debt obligations.”
The Russian economy has gone into crisis as a result of harsh sanctions imposed by the West, which include the freezing of central bank assets held abroad and the withdrawal of many Russian banks from SWIFT’s international payment systems.
Last week, the Russian Central Bank temporarily suspended payments and said on Wednesday that it had banned the payment of coupons to foreign investors with sovereign debt denominated in rubles.
On Sunday, the Central Bank said that creditors from Russia and from countries that do not comply with the country’s penalty will be paid in rubles at the exchange rate prevailing at the time of payment. Creditors can also be paid in the currency in which the debt was issued if they obtain special permission.
He added that for creditors in other countries, payments in rubles will be deposited in a special account governed by the rules established by the Central Bank.
Moody’s said default risk has increased and foreign bondholders are likely to recover only a portion of their investment.
“The potential recovery for investors will be in line with the historical average consistent with the Ca rating,” he said. “At the Ca rating level, recovery expectations are at 35-65% (of nominal value).”
Moody’s and two rating agencies, Fitch and Standard & Poor’s Global, rated Russia at Baa3 investment grade levels.BBB In early March. The three have since lowered their scores by several points, putting the country in a “junk” rating.
Standard & Poor’s rates Russia as “CCC-minus” while Fitch is at B with a negative outlook, which means a rating downgrade is possible.
