Chelpipe coupon payments hit a brick wall

2 min read
EMEA, Emerging Markets
Sudip Roy

Chelpipe has become the latest Russian corporate to announce that a coupon payment on an outstanding Eurobond has been blocked, undermining its ability to pay investors.

The pipe manufacturer said its correspondent bank, Citibank, New York, has stopped the processing of a US$6.75m coupon payment on its US$300m 4.5% 2024 notes because of compliance reasons.

"Chelpipe remains of the firm view that there are no valid reasons for the March 2022 interest to remain blocked. Chelpipe also notes that it is not owned, controlled or associated with a person designated under the EU, US or UK sanctions presently in force. Accordingly, the delay in payment is purely of a technical nature and Chelpipe can confirm that it has sufficient liquidity to meet its payment obligations as they fall," it said in a statement.

The coupon payment was due on March 21 but Chelpipe initiated the payment process on March 18 through its issuing entity, Chelpipe Finance Designated Activity Company. However, it was notified by its account bank that the payment had "not cleared as a result of a block by the correspondent bank, Citibank, New York, which cited compliance matters as a reason for the block". Citigroup declined to comment.

The company said it is now engaging with the account bank as it tries to find the reasoning behind the blocking of the funds. It said the blocking "constitutes a potential event of default under the loan agreement".

The company also said it "remains committed" to resolving the situation as soon as possible "to ensure that the interests of the noteholders are not prejudiced, and continues to interact with all parties involved".

Several Russian corporates have issued statements over the past week about potential blocks to coupon payments on their Eurobonds, including NLMK, Evraz and Severstal. EuroChem and Russian Railways are also facing problems getting payments processed.