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7 Apr, 2022 12:00

Russian Railways blocked from paying Western bondholders

The company is on the UK sanctions list, preventing payments
Russian Railways blocked from paying Western bondholders

Russian Railways (RZD) said on Thursday it was unable to make coupon payments on its dollar-denominated Eurobonds on time due to technical problems with Western banks. The company was hit with UK sanctions last month, so any bond payments are considered frozen assets and blocked on the account of the agent bank.

RZD was supposed to redeem the issue of Eurobonds with a nominal volume of about $605 million on April 5 and pay interest on it. However, the issuer of Eurobonds, RZD Capital, was unable to obtain funds from Russian Railways to pay the holders of the debt securities. The received funds were blocked on the accounts of RZD Capital, which makes it impossible to transfer them to bondholders.

Russian Railways was hit with British sanctions on March 24. The company said it is taking all available actions to fulfill its obligations to the holders of securities. It had applied to the UK Financial Sanctions Enforcement Authority (OFSI) for a license to service its debt obligations. However, it could take several weeks to process the request, RZD says.

Earlier, Russian Railways failed to make coupon payments on Eurobonds denominated in rubles, Swiss francs, and British pounds on time. It has warned that payments on Eurobonds may be delayed or suspended indefinitely by the relevant payment agents or correspondent banks due to their internal compliance procedures.

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