Russian oligarch’s steel company set to default on its debt Wednesday
Russian steel producer Severstal PAO is set to default on Wednesday, the Wall Street Journal reported.
The company owed a coupon payment for 2024 loan participation notes on March 16th with a five-day grace period, which expires Wednesday. A “test” payment sent last week for its dollar bond has yet to be processed by Citibank. The test payment has been transferred to the bank’s US accounts but has not been paid to the bondholders. A total of $12.6 million is owed.
A person close to the matter said the company could default early Wednesday.
Severstal’s main shareholder is Alexey Mordashov, one of Russia’s wealthiest individuals with an estimate fortune of $29 billion. He was sanctioned by the European Union on February as a result of Russia’s invasion of Ukraine.
Western sanctions have effectively cut Russia off from the global financial system, and Western banks are hesitant to do business with Russian companies. Economists have predicted that Russian firms would consequently default on their debts. If Severstal does default on Wednesday, it will be the first major Russian company to do so in six years,
Another Russian steelmaker, Evraz, finds itself in a similar situation. An $18.9 million coupon payment on a bond that was due on March 21st was blocked by Société Générale. Roman Abramovich, another Russian oligarch, is a major shareholder of Evraz. The company has stated that the blocked coupon payment is a result of the UK and EU’s sanctions on Abramovich.
According to JP Morgan, Russian firms have $98 billion of outstanding debt and are due to make $17 billion of payments on that debt this year.