STLC will pay Russian investors up to 160 billion rubles. on Eurobonds of subsidiaries of foreign companies
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STLC is the last Russian company to start paying domestic investors on Eurobonds of foreign subsidiaries. The initial amount was estimated at 160 billion rubles. But we are only talking about securities held in Russian depositories and future coupons. At the same time, the issue of missed payments and replacement bonds remains open. Market participants doubt that the issuer will cope with the task of issuing new securities before the end of 2023. And lawyers do not plan to stop litigation on overdue payments.
On August 10, the STLC Board of Directors approved payments of up to 160 billion rubles. on Eurobonds of subsidiaries for holders, taking into account rights in Russian depositories. The decision does not concern the issuance of replacement bonds or missed coupon payments, these issues are planned to be resolved at the next meetings of the Board of Directors. Thus, STLC became the last Russian issuer, which, after a one and a half year delay, began paying out its Eurobonds.
The issuers of Eurobonds were foreign companies of STLC — GTLK Europe and GTLK Europe Capital DAC. There are currently six issues in circulation with a nominal value of $3.25 billion. In June, the High Court of Ireland began liquidation proceedings against these companies. In early August, the UK government issued licenses that allow STLC to conduct financial transactions related to the bankruptcy of subsidiaries.
The protracted decision on STLC’s debts was connected, in particular, with the peculiarities of the Eurobond issue. As Mikhail Kadochnikov, the first deputy general director of the company, explained, the asset and cash flow were formed outside the country (see Kommersant dated April 28). At the same time, according to Kommersant’s source on the stock market, for a long time investors had difficult negotiations with STLC, the company did not hear market participants, but after mass lawsuits began to be filed, they revived, and finally active negotiations began with paper holders.
At the same time, the amount currently allocated may not be enough to settle accounts with all Russian holders. Alexander Afonin, head of the bond market analysis at the investment bank Sinara, estimated that the amount of 160 billion rubles. covers about 90% of the company’s forthcoming coupon payments and redemptions in favor of Russian investors.
According to the company, $1.6 billion of bonds are held through NSD and subordinate depositories. According to Aleksey Bulgakov, head of debt market analytics at Renaissance Capital, there should be about $250 million in accumulated coupons, of which about $100 million will come from Russian holders.
Nevertheless, market participants generally positively assessed STLC’s decision. However, this is only a small part of the problem, the Association of Bondholders (ABO) emphasizes. Many questions remain – how it is planned to pay off the missed coupon payments when the replacement bonds are issued. The AVO added that the presidential decree sets a deadline for this until the end of 2023, “but there is no certainty that the issuer will cope in the remaining months.”
In addition, many Russian holders accounted for their securities on accounts not in Russian, but in foreign depositories, said Maria Lyubimova, head of the practice of legal support for foreign economic activity at the Regionservis Bar Association. The impact of the bankruptcy procedures of subsidiaries is not yet clear, since it is not clear whether STLC is going to fulfill its obligations to foreign holders of Eurobonds, says Alexei Tretyakov, general director of Arikacapital.
Judicial proceedings related to Eurobonds and other securities, including those involving STLC, according to lawyers, will continue. According to Vadim Reznichenko, head of the atLegal law firm, the STLC decision will not have direct procedural consequences for the arbitration proceeding in the interests of Eurobond owners, since so far this action is only a corporate procedure that allows you to start paying off current and future payments on Eurobonds. At the same time, not future payments are collected, but those missed in 2022 – the first half of 2023.
Presidential Decree No. 430 does not contain a direct order to pay for such coupons, which, in the opinion of Mr. Reznichenko, leaves the company a certain amount of discretion in this matter. “Given that before STLC did not make any special attempts to pay off the owners of Eurobonds, it still remains more expedient to demand such payments through the courts,” the lawyer believes. Also, through the court, he intends to collect ruble interest for the use of other people’s funds, which “make up a fairly significant amount.”
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