Evraz, the London-listed steelmaker part-owned by Roman Abramovich, mentioned it has been blocked from making an curiosity cost on one among its bonds in a transfer it believes is expounded to UK sanctions towards the Russian-Israeli billionaire.
In a press release to the London Stock Exchange on Monday, Evraz warned that its incapacity to pay the coupon on a $700mn bond that matures subsequent 12 months might push it to default on its debt.
The firm mentioned it despatched the $18.9mn cost to a New York-based unit of Société Générale — which is its so-called correspondent financial institution — two days forward of Monday’s scheduled cost. Typically, SocGen would move the sum on to the bonds’ paying agent, one other financial institution that in flip distributes the money to bondholders.
But SocGen stopped the cost “for compliance”, Evraz mentioned, regardless of the corporate offering “all requested information concerning this payment, its economic substance and nature”.
The block highlights the issues confronted by Russian and Russia-linked corporations attempting to service debt following unprecedented western sanctions which have lower the nation out of worldwide funds programs.
Evraz mentioned it “understands that the situation has its roots” within the UK’s choice to sanction Abramovich this month — a transfer that hit the proprietor of Chelsea Football Club with a full asset freeze and a journey ban, and likewise led to the suspension of the corporate’s shares buying and selling in London.
The firm mentioned it was not sanctioned and reiterated its earlier feedback that Abramovich, by way of his 28.6 per cent stake, “does not have effective control” of Evraz. It added that it had sought readability and affirmation from UK authorities’s Treasury and the Foreign, Commonwealth and Development Office concerning the difficulty.
Evraz declined to supply additional element when approached for remark. Société Générale additionally declined to remark whereas the Treasury didn’t instantly reply to a request for remark.
Evraz mentioned that “apart from malfunction of financial infrastructure, there are no reasons for a potential event of default”. Evraz had “sufficient liquidity” to cowl the cost, it added. It is because of make an curiosity cost on one other bond on April 4.
The firm is included within the UK, however has metal and mining operations in nations together with Russia, Ukraine, Kazakhstan, the US and Canada.
When it sanctioned Abramovich, the UK authorities claimed that Evraz made metal for Russian tanks and that it equipped items and providers to the Russian authorities that might contribute to the invasion of Ukraine. At the time, Evraz denied the claims and tried to reassure buyers over its hyperlinks to the oligarch.
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Abramovich in February took direct management of his 28.6 per cent stake in Evraz, which he beforehand held by way of Greenleas International Holdings, an organization registered within the British Virgin Islands.
Investors had been bracing for a wave of defaults from company Russia following the sanctions imposed to punish Russia’s president Vladimir Putin for the invasion of Ukraine. However, some Russian corporations, together with Gazprom and Rosneft, have stunned markets by making funds to western buyers.
The Russian authorities made a $117mn cost on two of its dollar-denominated authorities bonds final week, though the method took longer than normal as banks concerned within the cost chain sought assurances from US authorities that they have been in a position to deal with the money.