A view shows train carriages, owned by the Russian Railways Company, on the side tracks in Moscow, Russia, March 1, 2017. REUTERS/Maxim Shemetov/File Photo

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LONDON, April 11 (Reuters) – A credit committee has voted to classify a bond issued by Russian Railways as defaulted, marking the first time a debt security issued by Russia has been officially classified as defaulted since the country’s invasion of Ukraine.

The EMEA’s Credit Derivatives Determination Committee (CDDC), whose members include some of the world’s largest investment banks, said on Monday it had decided that a “default” credit event had occurred on Swiss franc loan participation notes related to Russian state-owned railways. .

The Loan Participation Notes due 2026 were issued by RZD Capital to fund a 250 million Swiss Franc ($268 million) loan to Russian Railways.

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Western sanctions against Russia following the invasion of Ukraine, which Russia calls a “special military operation”, have strained the Russian economy and raised questions about the possible default of many bonds issued by Russian companies.

This, in turn, raised the possibility of substantial write-offs by Western lenders to Russia.

Bank of America (BAC.N), Goldman Sachs International (GS.N) and JPMorgan Chase Bank (JPM.N) are among the committee members who voted “yes” to the question of whether a default will occur. is produced on these assets. The committee met on Friday.

Some analysts see it as a test to determine whether a creditworthy issuer who cannot physically make payment due to sanctions is considered in default.

“Apparently the CDDC is saying yes…and likely means they’ll do something similar with the Russian sovereign trying to pay a coupon in USD – but failing,” a source said, speaking under cover of the statement. ‘anonymity.

A spokesperson for UBS AG, the paying agent for the tickets, declined to comment.

Russian Railways, which operates both freight and passenger trains on thousands of miles of track, said it tried to pay the interest due on March 14, but was unable to could not do so due to “legal and regulatory compliance obligations within the correspondent banking network”, according to an official announcement published by the SIX Swiss Exchange and referenced in the request to the commission.

Russian Finance Minister Anton Siluanov said the country would take legal action if the West tried to force it to default on its sovereign debt. Read more

Russia could face its first external sovereign default in more than a century after arranging to repay an international bond in rubles earlier this week, even though payment was due in US dollars.

($1 = 0.9335 Swiss francs)

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Reporting by Karin Strohecker; Editing by Jorgelina do Rosario, David Holmes and Jonathan Oatis

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