Severstal is on course to become the first major Russian company to default on its debt since the invasion of Ukraine, after Citigroup blocked an interest payment from the company that is majority owned by oligarch Alexei Mordashov.
The steelmaker has spent the past week attempting to pay a coupon on a $800mn bond, but has now exceeded a five-day grace period that means holders of the debt could force the company into default.
Severstal said on Wednesday that Citigroup, its so-called correspondent bank, had “frozen” the $12.6mn interest payment “due to regulatory investigations”. The bank asked the company to obtain a licence from the US Office of Foreign Assets Control before it would process the cash, two people familiar with the matter said. Ofac, the agency that enforces US sanctions, can provide special authorisations to engage in transactions that would otherwise be prohibited.