(Bloomberg) — Russia’s long-term issuer and senior unsecured debt ratings were cut to Ca from B3 with a negative outlook by Moody’s Investors Service on expectations that capital controls by the Central Bank of Russia will restrict cross border payments including for debt service on government bonds.
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The change comes less than a week after Moody’s stripped Russia of its investment-grade rating, slashing Russia’s creditworthiness to B3 on March 3.
Read More: Russia Cut to Junk by Moody’s, Fitch as Sanctions Mount
The downgrade “is hence driven by severe concerns around Russia’s willingness and ability to pay its debt obligations,” Moody’s said in a statement on Sunday. “Moody’s view is that the risk of a default occurring has significantly increased and that the likely recovery for investors will be in line with the historical average, commensurate with a Ca rating.” The recovery expectations are at 35% to 65%, it said.
The decision is supported by a reported statement from the National Settlement Depository that coupon payments on OFZ government bonds due on March 2 have only been paid to local holders of the papers, it said.
Moodys announced the change hours after President Vladimir Putin signed a decree allowing the Russian government and Russian companies to pay foreign creditors in rubles as a way to stave off defaults while capital controls remain in place.
Read More: Putin Seeks to Avert Defaults With Ruble Payments to Creditors
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