(Bloomberg) — A Russian company that is about to miss the deadline for a debt coupon urged bondholders to contact Citigroup Inc., which blocked payment and requested permission from the US Treasury to pay.
Steelmaker Severstal is applying for the required licenses to process the payment, it said in a statement, which includes a UK number to a switchboard at Citigroup, the payment agent and the trustee. Interest of $12.6 million was due on March 16, and with the five-business-day grace period ending today, Severstal risks becoming the first Russian company to miss the foreign currency debt deadline since the war began in Ukraine.
The firm is seeking to “contact the relevant authorities to seek a broader solution to minimize the unintended effects of sanctions restrictions on bondholders,” the statement said, adding that it hopes that the situation will be resolved as soon as possible.
The statement follows a request from Citigroup for Severstal to obtain permission from the U.S. Office of Foreign Assets Control (OFAC) before he can remit the money, according to two people familiar with the issue. A Citigroup spokesman declined to comment on Wednesday, as did Severstal's press department.
While the company itself is not sanctioned, the majority shareholder, Alexey Mordashov, is listed on the sanctions lists of the European Union and the United Kingdom. However, because it is not included in any US sanction, Severstal refrained from preemptively applying for an OFAC permit, one of the individuals said. A US Treasury spokesman could not comment on agreements with a company or individual that the nation has not sanctioned.
Severstal's unprecedented request to bondholders to support the company comes hours before the bond coupon grace period expires. A late payment is likely to exacerbate the anxiety of foreign investors at a time when there is uncertainty about whether Russian companies can continue to meet their debt obligations given the amount of sanctions and capital controls in place.
If the money is not in creditors' accounts by the end of Wednesday, they can choose to wait several days to see if Severstal can obtain the necessary permits to pay interest, rather than speeding up the debt and demanding full payment.
In case of default, the company's international operations and applications would only cover 16% of the company's unsecured external debt, according to estimates by JPMorgan analysts on March 4.
Original Note:
Severstal Asks Bondholders to Call City as Deadline Looms (1)
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