Sanctions delay payments to Russian companies holding Eurobonds

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March 23 (Reuters) – Russian holders of domestic corporate Eurobonds are facing delays in receiving payments settled by international agents, as transactions are blocked by sanctions, the National Settlement Depository said (NSD) of Russia, companies and analysts.

Western sanctions and counter-sanctions from Moscow mean that the process of paying for hard currency bonds issued by Russia or Russian companies has become much more complicated, with some payments being delayed or blocked in transit.

Payments of Russian sovereign and corporate Eurobonds were previously handled by international clearing and settlement firms such as Clearstream and Euroclear, which process payments and confirm ownership of assets before sending cash to bondholders. bonds, then to NSD for domestic holders.

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Euroclear, owned by stock exchanges and banks, and Clearstream, part of Deutsche Boerse, said they would stop settling trades in Russian securities in response to European Union sanctions after the Russian invasion of the Ukraine last month, which Moscow describes as a “strategic military operation”. Read more

“Delays are possible for payments cleared through international custodians,” NSD said in a statement to Reuters.

“This could be related to the ‘manual’ processing of orders related to Russian companies as well as the need to seek clarification from European regulators,” NSD added.

Clearstream and Euroclear did not respond to requests for comment.

ALLOCATED PAYMENTS

Russian companies must pay off $18.5 billion in external debt, including interest payments called coupons, by the end of the year, analysts at ITI Capital estimate, and the Russian Finance Ministry must pay an additional $3.4 billion in sovereign Eurobonds.

Russian holders of at least four corporate Eurobonds are struggling to get payouts, according to the companies themselves and ITI Capital, namely steelmakers NLMK (NLMK.MM) and Severstal (CHMF.MM), state-owned Russian Railways and fertilizer producer Eurochem.

NLMK, Russia’s top steelmaker, said in a statement on Tuesday that it had paid a coupon on its Eurobond due in 2024 and foreign noteholders have started receiving their coupon payments, while Russian holders have not.

“This is because … Euroclear and Clearstream no longer settle transactions with the Russian NSD. We currently see no legal grounds prohibiting Euroclear and Clearstream from processing payments to Russian residents,” he said.

Severstal, whose main shareholder, Alexey Mordashov, was sanctioned by the EU on February 28, is also having problems processing its Eurobond coupon payment.

Payment sent last week by Severstal for the coupon on its 2024 Loan Participation Notes (LPNs) has not yet been processed by Citibank, with the grace period due to expire on Wednesday, a source close to the bank told Reuters on Tuesday. Severstal.

Russian Railways and Eurochem did not respond to Reuters requests for comment.

In a separate statement, NSD said it was receiving Eurobond payments from Euroclear, but would not process them until Euroclear got clarification from European regulators.

NSD said it does not receive payments from Clearstream.

“After the restrictions are lifted, payments will be processed…as usual,” NSD said.

Dmitry Lesnov, head of customer service at Finam, said his company does not receive payments made through Euroclear or Clearstream and is awaiting further clarification.

Coupon payments due over the next few days include Gazprom (GAZP.MM) and SIBUR on Wednesday, Russian Railways on March 25 and Polyus Gold (PLZL.MM) on March 28, the same day Russia is due to establish its next international obligation. Payment.

The Russian Finance Ministry recently paid out $117 million and $66 million in Eurobond coupons, with foreign bondholders receiving their funds.

The Kommersant daily, citing a source at a major brokerage firm, said on Wednesday that some Russian sovereign Eurobond holders had not received coupons.

The Department of Finance did not respond to a request for comment.

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Reuters reporting; additional reporting by Karin Strohecker and Marc Jones in London; Editing by Alexander Smith

Our standards: The Thomson Reuters Trust Principles.

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