Sanctions against Russia are disrupting the flow of payments between bond issuers and investors as lawyers at banks and other intermediaries assess the risk of acting on behalf of companies with links to Moscow.
Fund managers typically take it for granted that payments on the bonds they own, or regular interest payments, will reach their accounts.
But the unprecedented sanctions levelled on Russia since its invasion of Ukraine have upended global finance, snarling the firms that shuffle these payments around the world in legal discussions about what obligations they can meet without falling foul of the restrictions.
Lawyers and compliance departments in western institutions must assess the risk of breaking sanctions as well as the risk of being sued by clients for forcing them in to defaults. Payments are being judged on a case-by-case basis, meaning that previous actions are not necessarily a guide to the future.
Big investment banks are holding up cash flowing out of Russia while they work out whether they can handle it, and in some cases have blocked interest payments altogether.
“As a portfolio manager it’s not generally your job to understand the nuances of payments systems. But now we all have to pay attention,” said Andrea DiCenso, a bond portfolio manager at Loomis Sayles in Boston.
People don’t appreciate how much infrastructure sits behind these payments. It’s a convoluted system to get your head…
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