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March 11, 2022updated 23 Mar 2022 1:15pm

Pimco faces potential losses linked to more than $1bn Russian debt

Understand the impact of the Ukraine conflict from a cross-sector perspective with the Global Data Executive Briefing: Ukraine Conflict


Pacific Investment Management (Pimco) is bracing for potential losses linked to its billion-dollar exposure to Russian debt as the country moves closer to a sovereign default, reported Bloomberg.

The US-based investment manager is said to have amassed at least $1.5bn of sovereign debt.

It also placed $1.1bn of credit default swaps on Russian debt at the end of 2021.

According to the report, Pimco sold credit-default swaps to investors through at least four of its funds. The firm will be forced to pay out these investors, if Russia defaults on its debt.

Pimco’s $140bn Pimco Income Fund (PIMIX) had written almost $942m of protection on Russia at the end of 2021.

Its Total Return bond fund, Emerging Markets bond fund, and Low Duration income funds are said to be the other Pimco funds holding positions connected to Russia.

The exposure, even if sizeable, only represents a small fraction of the $2.2trn Pimco managed at end of 2021.

A Pimco representative declined to comment on the development when approached by the news agency.

The stringent sanctions announced by the US and its allies on Russia over its military invasion in Ukraine have put a massive strain on the country’s economy, nudging it close towards a default.

Russia has $117m worth of coupons due for payment on dollar bonds next week.

The swaps could be triggered eventually, even if the country makes the payment in rubles, instead of dollars, the report said.

Meanwhile, distressed debt buyers are approaching banks holding Russian loans, eyeing potential sale of the exposure at a discount as the market remains volatile in the wake of Ukraine crisis.

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