The statement of the rating agency Moody’s about the default of Belarus on the issue of eurobonds Belarus-27 was regarded by the Ministry of Finance of the republic as a provocation.
„We believe that Moody’s actions are provocative and aimed at artificially creating shocks and unrest around the Eurobonds of the Republic of Belarus,” the statement on the ministry’s website says.
Belarus is making every effort to make settlements with Eurobond holders on an alternative basis, the ministry stressed.
They recalled that they terminated relations with Moody’s in 2018 and the rating actions of the agency were not requested by the Belarusian side.
„The agency’s decision was made without a single clarifying question addressed to the Ministry of Finance. In our opinion, there is bias in the assessments, a clear and predictable adherence of the agency to the general line of beating the default,” the Ministry of Finance emphasizes.
The department reiterates that „today, it is becoming a practice for individual rating agencies to completely ignore the obvious facts regarding the fulfillment of obligations under Eurobonds of the Republic of Belarus, including Citi’s refusal to provide services of a payment, financial, transfer agent and registrar for Eurobonds of Belarus in the framework of sanctions decisions taken by the West” .
The Ministry of Finance recalled that the joint resolution of the government and the National Bank adopted on June 29, which allowed settlements on Eurobonds in Belarusian rubles, contains „an instruction to develop a detailed procedure for making settlements with Eurobond holders.”
“At the same time, in a constantly changing foreign policy environment, it is quite difficult to take into account all the “pitfalls” of the growing sanctions policy of the West and quickly consolidate new rules of work for guaranteed payments to end owners,” the Ministry of Finance explains the lack of an appropriate mechanism at present.
On July 14, Moody’s agency informed the government of Belarus that it considers the payment of external debt in Belarusian rubles to be a default.
On June 29, the Belarusian Ministry of Finance announced that Belarus had made a payment on Eurobonds Belarus-2027 in Belarusian rubles, taking into account the joint resolution of the government and the National Bank adopted the day before, which allows the payment of interest payments on Eurobonds in the national currency.
The Ministry of Finance transferred the amount in Belarusian rubles to a special account in Belarusbank and offered the paying agent to independently withdraw funds from this account and pay off investors. On July 7, the paying agent and registrar of Citigroup and Citibank refused to act as agents for Belarusian Eurobonds.
On July 7, Fitch downgraded Belarus’ long-term foreign currency Issuer Default Rating (IDR) to 'C’ from 'CCC’ as the national currency payment „contradicts bond documentation that does not allow settlement in alternative currencies.” The agency also warned that if payments on the Belarus-27 Eurobonds are not made in accordance with the original terms by July 13, then Fitch will consider this a default and will downgrade Belarus’ IDR to 'RD’ (Restricted Default) and the rating of this Eurobond issue to „D”.
The Ministry of Finance of Belarus stated that it considers the situation to be a force majeure and is looking for successors to these organizations, and also accused Fitch of being subjective.
Moody’s, unlike Fitch and S&P, is not the official rating agency of Belarus.
The issue of 10-year Eurobonds Belarus-27 for $600 million with a yield of 7.625% per annum was placed in June 2017. In parallel, the Ministry of Finance placed 5-year Eurobonds for $800 million at 7.125% per annum with maturity in February 2023. The deal was arranged by Citi and Raiffeisen Bank.
Now there are 5 issues of Belarusian Eurobonds in circulation for a total of $3.25 billion. The last time Belarus entered the Eurobond market was in June 2020, when it placed 5-year Eurobonds for $500 million at 6.125% and 10-year Eurobonds for $750 million at 6.375% . The placement was organized by Citi, Societe Generale, Raiffeisen Bank and Renaissance Capital. In the structure of the investor base, more than 50% accounted for US residents.