Sovcombank PJSC to miss payment on bonds issued by Irish subsidiary

Sovcombank PJSC is the first Russian bank to say it will miss a payment on foreign-currency bonds due to sanctions imposed on the nation since its invasion of Ukraine. The bonds were issued by an Irish entity.

Russia's ninth-largest lender was due to make a $12 million (€11 million) interest payment on notes maturing in 2030 on Thursday, according to data compiled by Bloomberg, but the bank said in a statement that it would stop payments on four notes issued by its Irish subsidiary, Sovcom Capital DAC.

Sovcombank, which grew in recent years after buying the local financial units of General Electric, India's ICICI Bank and Turkey's Garanti Bank, was among banks targeted by sanctions in the early days of the war. It's been cut off from Swift – a bank messaging system – and its assets abroad have been frozen.

The bank said it “doesn’t have the technical ability to access its blocked assets and fully use the international payment infrastructure to service the debt.”

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In the meantime, it’ll continue to accrue coupons on its bonds due 2025 and 2030, while trying to develop a mechanism for payment of holders accounted for under Russian depositories. Accrual of interest on the perpetual bonds is suspended.

Sovcombank is part of a growing club of Russian companies that are struggling to service their foreign-currency debts. Even the sovereign is faltering, having paid a recent payment on dollar bonds in rubles.

Steelmaker

Although flush with cash, the steelmaker Severstal PJSC was the first company to run out of time to service its debt, and others have followed since. The companies have been keen to show their willingness to pay bondholders, but have seen their cash blocked in payment systems due to compliance issues and sanctions.

Oilfield services firm Borets was forced to drop plans to redeem bonds due on Thursday with bank loans because "geopolitical instability and subsequent sanctions and regulatory developments" impacted its financing arrangements, it said in a statement. The company is now seeking to extend the maturity of the $330 million bond for a year. – Bloomberg