Russia’s $1.45 Billion Bond Buyback Has Investors Eyeing Monday

(Bloomberg) — Russia bought back the bulk of a soon-to-mature $2 billion bond using rubles, leaving the nation with far fewer dollars to repay its holders on April 4.

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The Finance Ministry said it had repurchased the equivalent of $1.45 billion of the bond maturing on Monday, or 72% of the debt outstanding, according to a statement on Thursday. That leaves just $552.4 million of the security remaining in circulation, according to the ministry, which said it sent corresponding notifications to the paying agent, Citibank N.A.’s London branch.

It’s a step that ensures local investors get payments regardless of the restrictions and sanctions that have been slapped on the nation for its invasion of Ukraine. Still, the clock is ticking for President Vladimir Putin’s government to repay the outstanding balance when it matures.

“Monday is still a key date for holders that did not sign up and are thus awaiting the final redemption payment at par,” said Padhraic Garvey, head of global debt and rate strategy at ING Financial Markets.

The Finance Ministry said earlier this week that it would buy back the maturing April 4 bond before it comes due at 100% of par value using the official central-bank ruble rate on March 31. The onshore ruble, which has been paring its losses in Moscow trading amid capital controls, strengthened for a ninth straight session to 83.2 per dollar on Thursday.

The 2022 bond was quoted at 90 cents on the dollar on Thursday, according to indicative pricing data, down from above-par in the week preceding Russia’s invasion of Ukraine.

Despite warnings from credit-rating companies, the government has so far stayed current on its debt obligations. Still, capital controls and restrictions imposed by the world’s biggest settlement systems have complicated and delayed the arrival of funds on previous payments for foreign and local investors alike.

On Thursday, though, JPMorgan Chase & Co. processed a nearly $447 million payment from Russia for its dollar debt due in 2030, allowing the nation to continue sidestepping a default.

Clearstream, the Luxembourg-based bank that was listed as the clearinghouse in the 2030 bond’s documents, also received payment for the coupon, according to a person familiar with the matter who declined to be named for not being authorized to speak publicly.

(Updates with context throughout.)