S&P downgrades Russian foreign currency rating

S&P downgrades Russian foreign currency rating

The Standard & Poor’s credit rating agency has downgraded Russia’s foreign currency rating to “selective default” signaling increased risks that Moscow is poised to default on foreign debt for the first time in more than a century.

S&P issued the downgrade after Russia made arrangements to pay dollar-denominated bond payments in rubles.

“We currently don’t expect that investors will be able to convert those ruble payments into dollars equivalent to the originally due amounts, or that the government will convert those payments within a 30-day grace period,” S&P said in a statement.

The agency also said the downgrade also reflected its assessment that sanctions targeting Russia “are likely to be further increased in the coming weeks, hampering Russia’s willingness and technical abilities to honor the terms and conditions of its obligations to foreign debtholders.”

Russia has committed to paying its foreign debts but has signaled that payments will be made in rubles if its overseas accounts remain frozen.

Several rating agencies, including S&P, previously downgraded Russian debt to “junk” status, indicating a high probability of default, in the wake of crushing sanctions levied after the Kremlin invaded Ukraine.

S&P issues a “selective default” rating in situations where debtors are likely to default on specific classes of obligations while continuing to make timely payments on others.

Russia has not defaulted on its foreign debt since 1917 during the Bolshevik Revolution.

— This story includes wire reporting.