Sanctions-hit Irish Rosneft SPV makes deferred $2bn debt repayment

An Irish financing vehicle of Moscow-based oil and gas giant Rosneft repaid $2 billion (1.81 billion euros) in dollar bonds on Wednesday, days after the debt fell due. The refund has ended fears that investors will get their money back amid an economic crisis triggered by Russia’s war on Ukraine.

The bonds were sold in 2012 by Rosneft International Finance, a Dublin-based special purpose finance vehicle (SPV), before the wider society was hit by Western sanctions in 2014 following the annexation of Crimea by Russia.

The bonds matured last Sunday, with the three-day repayment term believed to be due to public holidays in Russia on Monday and Tuesday – even though another state-controlled energy group, Gazprom, repaid 1.3 billion bond dollars, as expected, at the start of the week.

Bloomberg reported on Thursday that Rosneft’s debt was settled the day before, in dollars.

Concerns surrounding the settlement of the two bonds had grown over the weekend, when Russian President Vladimir Putin issued a decree allowing payment in rubles to bondholders from supposedly hostile countries, while Russian state institutions, companies and individuals close to the Kremlin have been hit with waves of Western sanctions in recent weeks.

Fault

A redemption in a currency other than that used to initially issue the bonds would be considered a default. The ruble has plunged in value against major currencies in recent weeks.

Creditors from countries that have not imposed sanctions against Russia, such as China, can be repaid in the currency in which a debt was issued if the debtor obtains special authorization to make the payment, according to the order of Mr Putin. Rosneft’s payment may have been transferred before the decree.

An estimated figure of more than $130 billion in foreign currency debt is owed by the Russian government and the private sector.

Tana T. Thorsen