By Tommy Wilkes

LONDON, (Reuters) – Gramercy is a distressed debt hedge fund that made a killing after the 1998 Russian crisis. It has also taken on Argentina, Venezuela and Venezuela for defaulted loans. Gramercy believes that a wager on Russia today would be too risky even though bonds trade at a tenth their face value.

Robert Koenigsberger was the founder of Gramercy, and his first trade was buying up Russian bonds.

Koenigsberger stated to Reuters that Russia has a limited ability to pay, as its systems for settling and clearing transactions and transferring bond ownership title are in disarray.

“If I go call my clients and say country A is in default and it’s trading at 25 cents and I think it’s worth 50 – great. I will take a look.

You can tell the same story for Russia. In an interview, the chief investment officer at the $5.5-billion fund stated that 9 out 10 of them would respond no. The tenth would reply ‘hell no’.

Russia describes the February 24th invasion of Ukraine as a “special military operations” in order to dearm Ukraine. Kyiv, however, and the West call it an unprovoked war.

Some Russian bonds were languishing at 10 cents per USD. However, their prices have quadrupled recently after Russia paid coupon and abstained from default. Russia’s 2043 Bond, for example, briefly fell to 45 cents from 12 Cents on March 8.

These payments were made possible by a U.S. temporary licence that allowed U.S. citizens to be paid on certain sanctions Russian government entities.

The exemption ends on May 25, but the remaining nearly $2 billion of sovereign bond payments are due to end 2022.

Koenigsberger thinks Russia will be increasingly unable to pay, even though the deadline might be flexible. Many of Russia’s warchest reserves have been immobilized by sanctions.

What percentage of their debt service capacity is held in the hands of other people? “I can’t think of a single time when there has been any negotiation for reparations in which the side wanting to be paid is not holding the cash,” said he.

Gramercy is a well-known investor who specializes in purchasing beaten up bonds. They also bet that prices will recover.

Koenigsberger didn’t rule out purchasing Russian bonds. He noted that Russia was obliged in 1996 to repay pre-Revolution debts, before the country could issue its first postSoviet-era bond.

Russia might vanish for some time, but it is not worth anything. This claim can’t be erased. Koenigsberger stated that you are buying a perpetual option and not necessarily a bond right now.

Russia will be removed from all major stock and bond indexes by March 31. Investors may try to sell off their stocks or write them down to zero.

You’ll see prices drop [on Russian bonds]He said that he was predicting increased forced sales.

BUILD UKRAINE

Instead, Gramercy bought Ukrainian Dollar Bonds and paid prices of the Dollar in the Low 20 Cents

Koenigsberger stated that it will look to leave in the mid-30s or lower 40s before a formal restructuring of its debt. He expected the bond write-downs to be 50% in line with previous such deals which involved Western creditors in Eastern Europe.

“The West will support Ukraine throughout, and even on the opposite side,” Koenigsberger said. Koenigsberger stated that it is possible for the support to be paid in a “quid proquo”.

The Ukraine’s bond 2040 traded Friday at around 24 cents per dollar. This is an increase from the lows of 13cs earlier in this month.