Petropavlovsk allowed the sale of assets amid problems with settlements

Petropavlovsk is due to pay interest on $12.36 million worth of Eurobonds in May, and to redeem them in November. The company considered

Gold mining company Petropavlovsk, which is unable to sell gold due to sanctions against Gazprombank, is exploring the possibility of selling its assets. This is stated in a press release from the company.

“The company has hired [consulting company] AlixPartners UK LLP to help the board of directors determine the company's course of action to protect the interests of all stakeholders, including creditors and shareholders. These options include the sale of the company's entire stake in its existing subsidiaries as soon as possible," Petropavlovsk said.

It is not yet clear how much income could be provided to shareholders or bondholders as a result of this process, the companies added.

The report says that the imposition of British sanctions against Gazprombank, implying an asset freeze, made it difficult for Petropavlovsk to service its debt in this bank. So, at the end of March, the company missed two payments: $560,000 (on a $200 million loan) and the equivalent of $9.5 million (on $86.7 million credit lines from subsidiaries).

S&P Downgrades Petropavlovsk to 'Selective Default' Business

In mid-May, Petropavlovsk is due to pay an interest payment on Eurobonds worth $12.36 million, and in November to repay them. The company notes that in the current circumstances it will be extremely difficult to refinance these bonds.

The company also indicated that a bill was being discussed in Russia to introduce liability, including criminal liability, for the refusal of individuals or legal entities in Russia to conduct business with counterparties on the basis of sanctions.

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“If such a law is passed, the board of directors will not be able to guarantee that its subsidiaries will comply with sanctions provisions in Russia,” Petropavlovsk stressed.

According to the Union of Gold Producers, Petropavlovsk is the fourth Russian gold mining company in terms of production in 2021. The main enterprises of the company (“Pioneer”, “Malomyr”, “Albyn”) and the Pokrovsky Autoclave Hydrometallurgical Plant are located in the Amur Region. Petropavlovsk's revenue in the first half of 2021 was $351.9 million, net profit was $48.9 million (data for the full year have not yet been published).

On April 12, S&P downgraded Petropavlovsk's long-term issuer credit rating to SD (selective default) from CCC-. The agency’s statement clarifies that the company was unable to pay interest on a loan from Gazprombank: the bank is included in the UK sanctions list, where Petropavlovsk is registered, therefore, it is prohibited from transactions with this credit institution.