According to a French association, Caisse Centrale de Dépôt des Emprunts Russes (CCDER), that is still trying to get payment for Russian 1906 5% bonds, believe it or not, Russia’s sovereign financials are worse than the Russian government discloses, just like Greece’s were.
Thus they’re asking ratings agencies to take a closer look and investigate the matter before simply letting Russia’s upcoming eurobond issue be rated and sold to investors:
Standard and Poor’s is currently investigating the Greek government’s use of swap agreements which enabled it to dissimulate the extent of its budget deficit. Ccder invites agencies to similarly investigate the dissimulation of Russian sovereign debt in that state’s accounts and documents pertaining to its currently quoted sovereign issues, to adjust the Russian state’s balance sheet accordingly, and thus to revise public debt from 8% to more than 32% of current GDP, before analysing Russia’s capacity to pay.
As Russia prepares to issue up to $17.8 billion in sovereign Eurobonds to new investors this year for the first time since its 1998 default, assigning a false and misleading rating on the basis of accounts known to be false and fraudulent could make rating agencies and any other party (bank, counsel, etc.) involved in the structuring, issuance, sale or any other action contributing to the dissemination of knowingly misleading and false information resulting in injury to past, present and future investors, liable for their actions.
The legally questionable habit of relying on information supplied by the issuer or arranger of debt instruments to the exclusion of other sometimes more reliable sources of information has failed, as evidenced by the subprime crisis and now Greece. Just like any duly diligent professional, credit rating agencies are under an obligation to take into account information provided to them, and even of an obligation to investigate the circumstances of the entities and persons they are analysing. It is time to institute a procedure whereby bona fide representative investors, who have remain ignored until now, can provide a rating agency with the information that is relevant to its analysis according to its rating methodologies – EC regulation 1060/2009 – and enforce its duly diligent analysis.
We can’t vouch for the validity of the accusations, which were sent by CCDER. They could be completely wrong, but it makes sense that issues such as this should at least be addressed. Certainly we’d do so if we planned on buying the upcoming Russian issue.
Failure to act upon recent notices to repay served to the Russian Federation by Ccder and citizens of six different countries, all holders of the same debt instrument, demonstrates unwillingness to repay debts which remain full faith and credit obligations of the Russian Federation as per the successor government doctrine of settled international law.
Simultaneously, on March 22nd 2010 the European Parliament is to hear holders of unpaid Russian bonds on the matter of misleading ratings assigned to governments which remain in a state of unresolved default.
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