scorecardRussian steelmaker Evraz says it may default on its debt because of sanctions on oligarch Roman Abramovich
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Russian steelmaker Evraz says it may default on its debt because of sanctions on oligarch Roman Abramovich

Harry Robertson   

Russian steelmaker Evraz says it may default on its debt because of sanctions on oligarch Roman Abramovich
Investment2 min read
  • Evraz said it faced a technical default after an interest payment on one of its bonds was blocked.
  • It thinks the payment was blocked because of sanctions on its biggest shareholder, Roman Abramovich.

The Russian steelmaker Evraz warned that it may be pushed into a technical default on its debt, saying it thinks its payments have been held up because of sanctions on its biggest shareholder, the oligarch Roman Abramovich.

London-listed Evraz said in a statement on Monday that it had made a $19 million payment on a $700 million bond that matures next year.

But it said Societe Generale New York, its foreign correspondent bank, had blocked the payment for compliance reasons. Societe Generale did not immediately respond to Insider's request for comment.

The steelmaker said the holdup had forced it to notify BNY Mellon, the bank responsible for getting the money to bondholders, about "the Potential Event of Default."

However, Evraz said that it had the money and that there was no reason for a default other than technical issues.

"The Company would like to highlight that apart from malfunction of financial infrastructure, there are no reasons for a Potential Event of Default. The Issuer has sufficient liquidity to complete the coupon payments," it said.

Evraz said it understood that the holdup was related to the UK's sanctions on Abramovich, who owns 28.6% of the company, following Russia's invasion of Ukraine.

The UK government earlier this month moved to freeze Abramovich's assets in the country, to bar him from visiting, and to block citizens and companies from doing business with him.

It scuppered his plans to sell Chelsea Football Club, the soccer club he bought in 2003. The UK's foreign secretary, Liz Truss, accused Abramovich of being close to Russian President Vladimir Putin.

Evraz said at the time and repeated in its statement on Monday that Abramovich did not have control over the company.

Trading in the steelmaker on the London Stock Exchange — its primary listing — was suspended earlier in March as a result of sanctions on the oligarch.

Evraz's default warning is a sign of the difficulties that Western sanctions could cause for companies when it comes to paying their debts.

So far, Russian companies have surprised investors by continuing to meet their interest payments on dollar bonds. One investor told Insider last week that they had received all their expected payments from Russian debtors.

The Russian government has also maintained its payments on its foreign bonds. It sent $66 million through to make good on coupon payments on Monday, having sent $117 million last week.

However, ratings agencies such as Fitch and S&P have sharply downgraded Russia's sovereign credit rating deep into "junk" territory.

Russian corporate and sovereign bonds have plunged in value, reflecting investors' concerns that defaults could still be coming.

Read more: Snap up these 8 high-quality stocks that are available at discount prices as the bear market continues, according to Morningstar

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