Abramovich ties leave Russian firm’s coupon payment in limbo

The Evraz coupon is one of a series of Russian bond payments due imminently from companies and the government.
Image: Simon Dawson/Bloomberg

A $18.9 million coupon payment on a bond issued by Evraz PLC has been blocked due to the Russian steelmaker’s ties to sanctioned billionaire Roman Abramovich.

Evraz moved the cash a week ago, but the company’s correspondent bank, Societe Generale New York, halted its transfer to paying agent BNY Mellon for compliance reasons, the steel company said in a regulatory filing on Monday.

The block “has its roots in the recently emerged uncertainties” after Abramovich was included in UK sanctions, according to the filing. The businessman, who holds 28.64% of the company’s equity, “does not have effective control of the company,” it said.

The Evraz coupon is one of a series of Russian bond payments due imminently from companies and the government. Billions of dollars have been put in question after Russia’s invasion of Ukraine resulted in unprecedented international sanctions, including the freezing of the foreign assets of billionaires and the foreign reserves of the Russian central bank.

The company says that the fate of its coupon appears to hinge on the penalties imposed on Abramovich by both the UK and the European Union. They’ve left his assets frozen and the future of his football club Chelsea FC uncertain.

Evraz has applied “all its efforts” to free up the payment in recent days, including providing the correspondent bank with information on the coupon’s “economic substance and nature,” according to the statement.

The company is listed on the London Stock Exchange though its shares have been suspended since March 10. The second and third largest shareholders, co-founder Alexander Abramov and Alexander Frolov, with 19.3% and 9.65% of the company’s stock, respectively, are not included in the sanctions list. Both stepped down from Evraz’s board following the penalties on Abramovich on March 11.

Infrastructure ‘malfunction’

SocGen and BNY Mellon both declined to comment when contacted by Bloomberg News.

“Apart from malfunction of financial infrastructure, there are no reasons for a Potential Event of Default,” Evraz said in the statement. “The Issuer has sufficient liquidity to complete the coupon payments.”

The coupon payment was payable on March 21, the filing said. Failure to transfer the cash starts the clock ticking on a grace period of five business days, according to the bond’s prospectus.

Evraz has sought clarifications from the Foreign, Commonwealth and Development Office and the Office of Financial Sanctions Implementation, it added.

© 2022 Bloomberg

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