Ministry Of Finance Preparing ‘Operation’ For Final Default Of Lukashenka Regime

Belarusian Eurobonds will be redeemed ahead of schedule at 30% of the face value, in Belarusian rubles.

The Belarusian Ministry of Finance received the right to pay off Eurobonds in rubles, redeem them ahead of schedule at 30% of the face value, and also replace them with government bonds on the domestic market. The corresponding resolution #643/20, issued jointly by the Council of Ministers and the National Bank, was published on the National Legal Internet Portal on September 28.

According to the resolution, the Ministry of Finance received the right to replace debt obligations on Eurobonds with obligations on government securities placed on the domestic market, while the Eurobonds will be cancelled.

Also, the agency can redeem Eurobonds ahead of schedule at 30% of the face value in order to cancel them in the future. The redemption amount should not exceed the volume of Eurobonds to be redeemed until 2023 inclusive.

At the same time, the execution of debt obligations under Eurobonds in Belarusian rubles is sanctioned.

To replace obligations under Eurobonds, the Ministry of Finance may also issue government bonds denominated in dollars. The terms of circulation of such securities will correspond to the terms remaining until the maturity date of the Eurobonds to be replaced, and the rate on them remains the same as on Eurobonds.

Replacement of debt obligations, early redemption or fulfillment of obligations under Eurobonds in Belarusian rubles are carried out through the Republican Central Securities Depository.

Early redemption payments are transferred by the Ministry of Finance in dollars to an account in Belarusbank. Further, the bank will transfer the funds to holders of Eurobonds, again in dollars, if there is the relevant technical feasibility. Otherwise, the money will be paid in rubles at the official rate.

In the same way — in Belarusian rubles at the official rate — the government bonds are redeemed and serviced.

The resolution enters into force after publication.

At the end of June Belarus transferred another interest to holders of Eurobonds, but did it in Belarusian rubles. The Ministry of Finance explained that it was due to technical difficulties, since foreign banks refuse to transfer funds to investors.

International rating agencies reacted to this: Moody’s announced the default of Belarus, Fitch warned about the possibility of default, and later downgraded the long-term rating of our country in foreign currency. S&P also downgraded the credit ratings of Belarus, and announced a default on Eurobonds.

In early July, it became known that the international financial conglomerate Citigroup Global Markets Europe AG and Citibank refused to work with Belarusian Eurobonds. At the same time, the Ministry of Finance announced that it would look for alternative payment agents.

In mid-September, Fitch Ratings downgraded the rating of four sovereign Eurobonds of Belarus from C to D, which means default. These are issues of securities maturing in 2023, 2026, 2030 and 2031.

What are Eurobonds, and how do they differ from regular bonds?

To simplify completely, Eurobonds are debt securities that are issued in foreign currency. The prefix “euro” does not mean that the securities are sold on the European market or that they are issued in euros. In fact, they can be sold both in the EU and, for example, in the USA or China, and they can be issued not only in euros. The prefix “euro” appeared in the word because such securities came from Europe.

At the same time, not only states, but also individual companies can issue Eurobonds. For example, earlier Eurotorg entered the market with such securities.

Still, Eurobonds should not be confused with ordinary bonds, which the Ministry of Finance is now actively issuing on the domestic market. Companies also issue ordinary bonds, both in rubles and in foreign currency.