Evraz, the London-listed steelmaker part-owned by Roman Abramovich, said it has been blocked from making an interest payment on one of its bonds in a move it believes is related to British sanctions against the Russian-Israeli billionaire.
In a statement to the London Stock Exchange on Monday, Evraz warned that its inability to pay the coupon on a $700 million (€634 million) bond that matures next year could push it to default on its debt.
The company said it sent the $18.9 million (€17.1 million) payment to a New York-based unit of Société Générale – which is its so-called correspondent bank – two days ahead of Monday’s scheduled payment. Typically, SocGen would pass the sum on to the bonds’ paying agent, another bank that in turn distributes the cash to bondholders.
But SocGen stopped the payment “for compliance”, Evraz said, despite the company providing “all requested information concerning this payment, its economic substance and nature”.
Up to 40,000 Ukrainian refugees expected in Ireland by end of April
Do politicians have a moral duty to take refugees into their homes?
‘I will not be held prisoner’: The transgender women turned back at Ukraine’s borders
‘We are all just waiting for victory.’ Ukrainians learn routines grimly familiar to previous generations
The block highlights the complications faced by Russian and Russia-linked companies trying to service debt following unprecedented western sanctions that have cut the country out of international payments systems.
Evraz said it "understands that the situation has its roots" in the UK's decision to sanction Abramovich this month – a move that hit the owner of Chelsea Football Club with a full asset freeze and a travel ban, and also led to the suspension of the company's shares trading in London.
The company said it was not sanctioned and reiterated its previous comments that Abramovich, through his 28.6 per cent stake, “does not have effective control” of Evraz. It added that it had sought clarity and confirmation from UK government’s treasury and the foreign, commonwealth and development office about the issue.
‘Sufficient liquidity’
Evraz declined to provide further detail when approached for comment. Société Générale also declined to comment while the UK treasury did not immediately respond to a request for comment.
Evraz said that “apart from malfunction of financial infrastructure, there are no reasons for a potential event of default”. Evraz had “sufficient liquidity” to cover the payment, it added. It is due to make an interest payment on another bond on April 4th.
The company is incorporated in Britain, but has steel and mining operations in countries including Russia, Ukraine, Kazakhstan, the US and Canada.
When it sanctioned Mr Abramovich, the UK government claimed that Evraz made steel for Russian tanks and that it supplied goods and services to the Russian government that could contribute to the invasion of Ukraine. At the time, Evraz denied the claims and tried to reassure investors over its links to the oligarch.
Mr Abramovich in February took direct control of his 28.6 per cent stake in Evraz, which he previously held through Greenleas International Holdings, a company registered in the British Virgin Islands.
Investors had been bracing for a wave of defaults from corporate Russia following the sanctions imposed to punish Russia's president Vladimir Putin for the invasion of Ukraine. However, some Russian companies, including Gazprom and Rosneft, have surprised markets by making payments to western investors.
The Russian government made a $117 million payment on two of its dollar-denominated government bonds last week, although the process took longer than usual as banks involved in the payment chain sought assurances from US authorities that they were able to handle the cash. – Copyright The Financial Times Limited 2022
