Bond is looking for an understudy – Newspaper Kommersant No. 195 (7396) of 10/20/2022

Eurobond holders of Russian companies are asking the State Duma to oblige the latter to issue replacement bonds. So far, only five issuers have announced such a decision. The issue of duplicate securities is associated with a number of difficulties, but the direct organization of payments in rubles is not an easy process, experts explain. They are waiting for another 10-12 companies to issue replacement bonds.

The Association of Bondholders (ABO) told Kommersant that they plan to write additional appeals to the State Duma regarding the mandatory issue by Russian state and quasi-state issuers of bonds replacing Eurobonds. The first letter addressed to the head of the financial market committee Anatoly Aksakov was sent by the association on 13 October. In it, the association reported that a number of state-owned companies are waiting for the lifting of sanctions from Western regulators, but as a result, not only Russian owners of their securities in foreign jurisdictions, but also investors in Russia do not receive payments.

At the same time, Russian companies were given the opportunity to issue replacement bonds. They are designed to replace Eurobonds, the payments on which do not go to the accounts of Russian investors in foreign depositories, primarily Euroclear and Clearstream. In fact, they duplicate the general parameters of the issue (volume, rate, currency), but the calculations are made in rubles. Until the end of the year, issuers have the option of a simplified issue of such securities, ie without registration of a prospectus. The Ministry of Economy proposes to extend such permission for the next year, but these amendments have not yet been adopted. “Kommersant” failed to quickly contact Mr. Aksakov, major issuers did not respond to the request.

Currently, only five issuers have launched processes to issue replacement bonds. Moreover, for four issues at the PIK group, Gazprom Capital and Metalloinvest, such securities have already been placed – in the amount of about $ 1.3 billion, which amounted to less than half of the Eurobond issue. In addition, applications are being collected for seven issues of Gazprom Capital, LUKOIL and Sovcomflot worth almost $8 billion. Alexander Bartenev, senior personal broker for international markets at BCS Mir Investments, believes that if payments are not made to foreign holders, sooner or late, the risk of default may materialize, this risk is quite high, so companies aim to reduce the volume of payments in foreign currency and “exchange” part of this debt for payments in local currency.

At the same time, the reasons why companies do not issue replacement bonds are partly economic, partly legal, explains Ekaterina Makeeva, partner, head of sanctions practice at A-PRO. Eurobonds are borrowing primarily in euros or dollars, replacing bonds are the replacement of part or all of the issue with ruble bonds. “Accordingly, when determining the feasibility of such a substitution, issuers cannot but pay attention to their own needs for ruble financing, the status of projects for which financing was attracted earlier, the exchange rate and the ratio of Russian and foreign investors participating in the bond program,” says Ms. Makeeva.

Nevertheless, Alexander Shurakov, a leading analyst at Otkritie Investments, expects an increase in the number of issuers of replacement bonds. “It is quite possible that 10-12 more issuers will be added to the five companies that have already placed such securities or are planning to do so in the near future,” the expert estimates. The peak of substitutions, according to Alexander Bartenev, will be in the second half of November.

Some issuers went the other way – they held meetings of Eurobond holders who approved the possibility of paying on them, including in rubles. In particular, a number of companies – Ozon, Veon, LUKOIL, Polyus, Severstal, Sovcombank, Domodedovo – have either scheduled meetings with bondholders or approved the dates of meetings in recent weeks, notes Alexander Bartenev. At the same time, meetings of holders must be held in accordance with the norms of the legal system in which the Eurobonds were issued, Mikhail Zhuzhzhalov, senior lawyer at Tomashevskaya & Partners, points out. Synchronization of processes in foreign and Russian issuers, he believes, is not regulated and needs to be tested.

Ksenia Kulikova