Interest Payment Delays Due to Western Financial Sanctions
Steel Company Severstal Faces Crisis if Unable to Repay by This Week
[Asia Economy Reporter Kim Hyun-jung] In Russia, which recently averted a default crisis by repaying sovereign bond interest in US dollars one day past the due date, concerns over corporate defaults are growing. The accumulation of unpaid corporate bond interest is heightening the sense of crisis.
On the 21st (local time), Bloomberg reported that Russian companies are struggling to repay debts and are feeling the isolation in the global financial market. According to the report, investors did not receive $12.6 million in interest from Russia's steelmaker Severstal by the payment deadline last week, and if the payment is not made by the end of the grace period this week, the company will face a default crisis. Severstal stated, "The company is doing its best to fulfill its obligations, but processing is delayed at the branch of the bank acting as the paying agent."
Russian steel company Evraz Group paid $18.9 million in interest on the 21st, but the funds were blocked by its correspondent bank Soci?t? G?n?rale. Evraz is a company in which Russian billionaire Roman Abramovich, who is under Western sanctions, holds shares.
Additionally, fertilizer company EuroChem Group had $19.25 million in interest payments blocked, and gold miner Polyus and state-owned transport company Russian Railways also have payment deadlines approaching within weeks.
Russian companies’ external debt is larger than sovereign debt, and if defaults spread, the repercussions could be uncontrollable. William Jackson of Capital Economics said, "This is a major risk as it could be a prelude to Russian corporate bond defaults," adding, "Russian corporate external debt is more than four times the national external debt."
Christian Maggio, Head of Portfolio Strategy at Toronto-Dominion Bank, said in an interview with Bloomberg TV, "More interest payments and repayments are scheduled for the remainder of this year and the next 12 to 18 months," and "The market will remain tense each time a payment deadline approaches."
Meanwhile, US financial services firm Standard & Poor’s Global (SPGI) announced plans to withdraw ratings for all Russian entities by June 15.
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