Russian steel giant Severstal fights to avoid default

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March 24, 2022: Russian steel giant Severstal, whose main shareholder Alexei Mordashov is under EU sanctions, is fighting to avert what would be the first default by a major Russian company since Moscow launched military action in Ukraine.

In a press release published on the website of the London Stock Exchange, the company said a “test payment” it sent on March 16 had “not arrived in the account of the issuer”, a Luxembourg group, because “the payment was frozen by the latter’s US correspondent bank, Citibank, “as a result of investigations by regulators”.

Severstal said it wanted to initiate an application for permits from the “relevant competent authorities” to process the payment.

Severstal had until Wednesday to make an interest payment of $12.6 million (11.5 million euros).

“We cannot make a coupon payment on time to the holders of our Eurobonds,” Director General Alexander Shevelyov wrote on VKontakte social media.

“This is an extraordinary situation for us that has arisen through no fault of our own,” he said.

“Severstal maintains a stable financial position, confirms its willingness and desire to fully meet its debt obligations, and has the necessary resources to do so,” he added.

“Unfortunately, our western financial partner has frozen the payment processing initiated by the company. We will continue to consult with partners and do everything we can to ensure that the holders of the bonds receive their money,” he said.

Citibank has rejected a request for comment from AFP.

Amid concerns that Russia might not be able to pay its debt, it paid $117 million in interest on two dollar-denominated bonds last week.

The US Treasury Department authorizes payments on government debt, but not on private debt, under the terms of sanctions imposed in response to Russia’s invasion of Ukraine.

Severstal itself is not subject to sanctions, but its main shareholder, billionaire steel magnate Alexei Mordashov, was added to the EU’s blacklist on March 2 due to his close ties to Russian President Vladimir Putin.

Sanctioned individuals have been affected by asset freezes and a travel ban.

Another case involved Evraz, a UK-based multinational steelmaking and mining company whose main stakeholder is sanctioned Chelsea Football Club owner Roman Abramovich.

The company said Monday that a debt coupon payment had been refused pending compliance by French correspondent bank Societe Generale, before saying Tuesday it appeared the payment had reached a US paying agent.

Potash producer Uralkali, meanwhile, said it was in a similar situation with French bank Credit Agricole, which it said had refused payment to creditors due to the sanctioned status of billionaire Dmitri Mazepin, controlling stakeholder Uralchem, Uralkali’s main shareholder.

Mazepin earlier this month sold a controlling stake that previously held 100 percent in Uralchem.

AFP/APP

Posted on: 2022-03-24T23:49:35+05:00

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