Russian steelmaker Severstal plans to make an announcement on the status of a coupon payment on Wednesday, ahead of the expiry of the grace period on the bond.
Last week the company said that it was ready to meet the coupon on its US$800m 3.15% notes due 2024 but that it was conducting a test payment to check whether money it sends will end up with bondholders or whether Citibank, the paying agent involved, will stop the funds reaching investors' accounts. The bond is quoted 15 bid, 25 offered, on Eikon.
A source at the company said an update would come soon. "We are planning a disclosure on this matter tomorrow on LSE."
Severstal said last week it had received permission from the relevant Russian authorities to pay the US$12.6m coupon, that was due on March 16, and has conducted consultations with the parties involved in the payment settlement process.
"At the moment we certify that there are no obstacles from Russian law side for the company to make the payment under the loan in order for the issuer to discharge the coupon payment under the notes," said the company on March 16.
"However, given the recent developments around the company, we have grounds to believe that Citibank, NA, London Branch, acting as principal paying and transfer agent and the account bank in respect of the notes, may refrain from processing the payment initiated by the company in accordance with the terms of the loan and the notes documentation." Citigroup declined to comment.
Severstal conducted a test payment amounting to 1% of the coupon. It added that if the test payment failed, it would "pursue the alternative options available to it to deliver the interest under the loan to the issuer so as to enable the issuer to fulfil its obligations under the notes documentation and will inform Citibank NA, London Branch (as trustee in respect of the notes) and the noteholders accordingly."
The test payment has yet to be processed by Citibank, a source close to Severstal told Reuters on Tuesday.
Another Russian steelmaker Evraz said on Monday that a coupon payment on its US dollar coupon payment due on its 5.375% Eurobond due 2023 has been blocked at its correspondent bank, Societe Generale, for compliance reasons, which the company believes follows the addition of Roman Abramovich to the UK's extended sanctions list. Abramovich owns 28.64% of the company.
Fertiliser company EuroChem has also had problems making a coupon payment that was due on March 14, after being blocked by Citibank, the paying agent, Bloomberg reported last week.