A steel mill operated by Severstal in Cherepovets, Russia.
Photo: Andrey Rudakov/Bloomberg News
Steel giant Severstal PAO said Citigroup Inc. has frozen interest payments to investors in the company’s bonds, setting up what would likely be the first debt default by a major Russian issuer since Russia invaded Ukraine.
Severstal said in a statement Wednesday that payment was frozen due to “regulatory investigations” and that it was committed to fulfilling its obligations under the loan. It said it had been in constant contact with Citigroup and would apply for any licenses needed for the payment to be made.
The company is majority-owned by Alexey Mordashov, a Russian billionaire who has been sanctioned by the European Union and the U.K. It had been due to pay a coupon on a dollar bond on March 16, with a five business-day grace period that expires Wednesday.
Severstal paid the $12.6 million interest payment to a unit of Citigroup, which collects the payments for bondholders, according to a person familiar with the matter. That money was transferred to the bank’s U.S. accounts but hasn’t yet ended up with the bondholders.
Citigroup has told Severstal that the company needs permission from the U.S. Office of Foreign Assets Control to make the payment, the person familiar said. Neither Severstal nor Mr. Mordashov are sanctioned by the U.S.
The Wall Street Journal reported Tuesday that Citigroup had told Severstal it wouldn’t pay the money.
Citigroup declined to comment.
Severstal said it was still working on ways to pay the bondholders and encouraged them to contact Citigroup to request they cooperate with the Russian company.
—Anna Hirtenstein contributed to this article.
Write to Alistair MacDonald at [email protected]
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