Russian steel giant Severstal faces looming default as bond payment remains in limbo due to sanctions

• Russian steelmaker Severstal may default if its payment doesn't go through today, according to a report.
• The company said it made a $12.6 million payment that has yet to be distributed to investors.
• Another steelmaker, Evraz, said it faces a technical default due to sanctions against its biggest shareholder, Roman Abramovich.

A major Russian steelmaker may default today if its payment doesn't go through, the Wall Street Journal reported.

Severstal, based just north of Moscow, made a $12.6 million interest payment on a dollar-bond to a Citigroup unit that distributes the money to investors, the Journal said. That payment, which was due March 16 with a five-day grace period ending Wednesday, has yet to be paid out to bondholders, according to the report, which noted the payment may still go out at the last minute. 

Citigroup did not immediately respond to Insider's request for comment on the matter and declined to comment to the Journal.

The possible default is the latest headache for Russia's corporations and its oligarchs, which have been largely cut off from the global financial system as a result of Western sanctions responding to Putin's war in Ukraine. 

Another steelmaker, Evraz, said it faces a technical default on its loans because it's likely that its latest payment was blocked because of sanctions against its biggest shareholder, Russian oligarch Roman Abramovich. Severstal, for its part, is majority-owned by major Russian billionaire Alexey Mordashov, who was listed as part of sanctions from the European Union, the Journal said. 

Russia' credit rating has been slashed deep into junk territory with a growing risk of default. It has continued making payments to its bondholders despite sanctions which blocked it from accessing about half of its $640 billion in foreign currency reserves. Last week, the country made a $117 million payment that was permitted to go through, and this week, it made another $66 million payment. Despite those payments, Russian corporate and sovereign bonds have plummeted in value, an indicator that investors are still concerned about a wave of corporate credit defaults.