Given the recent invasion, we believe one should consider scenarios where strengthened sanction regimes come into play, noting a non-zero probability that the issuer will not be able to/not willing to pay coupons to international investors in the bond.
Noting that the investor base in the USD denominated bonds was mostly domestic, the question is if there could even be situations where coupons are paid to domestic investors but not to international ones. In general, given the low general appetite for thermal coal deals in the global fixed income community, we would expect the deals that do to come out to come from parties that generally score lower on Governance factors.
We opine that the SUEK deal well illustrates how such deals and such correlations can be fraught with real financial risks for end-investors.
