Russia: Putin opponent reveals impact of Western sanctions
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Even companies not directly sanctioned but exposed to the Russian economy are finding the situation increasingly difficult to navigate. In a filing to the London Stock Exchange on Wednesday, mining firm Petropavlovsk revealed it has been left unable to make debt payments to its main creditor. Although listed on the London Stock Exchange, Petropavlovsk has extensive gold mining operations in Russia and describes itself as one of the biggest employers and economic contributors in Russia’s Amur Region. It also has a $200 million (£152.37m) loan with sanctioned bank Gazprombank (GPB).
According to Petropavlovsk it “remains prohibited” from making an interest payment of $560k (£426k) on this which first became due on 25 March.
A further $9.5 million (£7.24m) also became due on 28 March which the company said “has not been paid as a consequence of the Regulations.”
Petropavlovsk has further payments to come with $304 million (£231.59m) outstanding on a bond due to reach maturity in November.
As a result the company said it was “In the early stages of discussions with its advisers and GPB relating to a potential restructuring of the Group’s debt within the limitations imposed by the Regulations.”
Last week Petropavlovsk also revealed sanctions were preventing it from being able to sell gold to GBP, who is its usual buyer, and restricting it from finding any alternative buyers in Russia.
The company’s share price has fallen over 14 percent following this morning’s news of potential restructuring and has fallen more than half since the start of the conflict.
Another company left unable to make debt payments is steel maker Severstal which failed to make a payment of $12.6 million (£9.61m) due on 23 March after the payment was frozen due to sanctions.
This week the company revealed it has had to apply for a license to make the payment, and future payments, from the US Office of Foreign Assets Control (OFAC).
In a statement it said: “Mindful of the urgency of the matter we have requested that OFAC consider our application on an expedited basis.”
Meanwhile state owned rail operator Russian Railways and steel pipe maker Chelpipe both face the end of grace periods for debt payments on foreign bonds today.
So far payments have been blocked or delayed by paying agents due to the risk of breaching sanctions.
With the growing pressures on Russian exposed companies Anglo-Russian gold miner Polymetal said on Wednesday “contingency planning has been initiated proactively to maintain business continuity.”
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It has reportedly been looking at splitting its Russian and Kazakh businesses in order to reduce the potential impact of sanctions.
The firm said sanctions so far “did not have a material impact on the business of the Group” and had complied with all restrictions so far.
Strong demand for gold within Russia has even helped restore sales however the firm said the impact of any new potential sanctions was “yet unknown” and could “affect key Russian financial institutions as well as mining companies.”
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