Russia’s Severstal, one of the main flat steel producers in the country, has recently run out of time to pay interest on its foreign-currency debt.
According to sources, the company was not able to settle a $12.6 million dollar-bond coupon within a five-day grace period, which ended on Wednesday, March 23. The main reason for this situation is that Citigroup Inc. blocked the payment, saying that Severstal should get approval from the US Office of Foreign Assets Control before it could remit the cash. However, the company’s principal shareholder was previously sanctioned by the EU and the UK, but not by the US.
“This is an extraordinary situation for us,” said Alexandr Shevelev, Severstal’s CEO. “We continue consultations with partners and are doing our best to ensure that bondholders receive funds in accordance with the terms of the bond issue. I hope that this injustice will be resolved soon and the rights of bondholders will be respected.”
If the situation is not settled, there is a risk of Severstal’s creditors calling a default. Moreover, the company is not the only one having trouble in paying its foreign-currency debts. Russia’s Evraz earlier found itself in a similar situation, but on March 22 the company announced that the transaction was successful. NLMK successfully paid a euro-bond coupon, but Russia-based bondholders did not receive the payments as Euroclear and Clearstream do not perform transactions with a Russian depositary.