Veon asks creditors to wait – Business – Kommersant
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Veon Holdings BV has launched a settlement procedure in the UK to obtain the consent of holders of bonds worth $1.2 billion due in 2023 to defer it. The purpose of rescheduling Veon indicates the need to avoid double payment. The fact is that the Ministry of Finance of the Russian Federation demanded that PJSC VimpelCom ensure the fulfillment of obligations to Eurobond holders, and some of them initiated legal proceedings. But if VimpelCom starts making such payments, Euroclear or Clearstream may not recognize them, experts explain, and the obligations will return to Veon Holdings BV
On December 9, Veon Holdings BV posted on its website a message about the launch of a scheme of arrangement in the UK for holders of Eurobonds with a coupon rate of 5.95% per annum maturing in February 2023 (for $529 million) and at a rate of 7.25% maturing in April ($700 million). On November 24, Veon proposed to holders to postpone the maturity by eight months in order to be able to carry out corporate restructuring, and has now begun the procedure. In parallel, the holding announced the sale of 100% of its Russian asset Vimpelcom to top management in exchange for repayment of Veon’s Eurobond debt (see “Kommersant” dated November 24). Veon told Kommersant that “the extension applies to all 2023 bondholders and is also in their interests.” Vimpelcom declined to comment.
The restructuring agreement with the creditors is due on December 20 or later by a UK court.
“This is a commonly used procedure under the UK Companies Act. Replacement shares can be issued under a simplified procedure in Russia by a Russian company. Now we are talking about a Dutch company that placed bonds under English law. The decision of the court in this case is equivalent to the approval of the registration authority – this is a stage of the procedure provided for by law, ”explains Ekaterina Makeeva, partner at A-PRO Bank.
The court must approve the holding of a meeting of creditors (bondholders) at which it is supposed to approve the scheme for restructuring the notes. “In order for the restructuring agreement to be approved, more than half of the total number of creditors representing at least 75% of the total cost of debt (for each category of creditors) must vote for it,” Ms. Makeeva clarifies. The procedure applies to all holders, moreover, it is specifically aimed at Russian creditors, who make up the majority of bondholders of this issue, says Elena Mende, lawyer of the Anatoly Sobchak Baltic Bar Association.
Veon explains the need to reschedule bonds due to the risk of double payments.
According to Elena Mende, as a result of the sanctions imposed against Russia, cash payments of both interest and principal that have already been made or will be made on the 2023 and later bonds through Euroclear and Clearstream are not actually transferred to the beneficial owners papers.
According to the Decree of the President of the Russian Federation of July 5, Russian legal entities that have obligations related to Eurobonds are nevertheless obliged to ensure the fulfillment of obligations to holders of Eurobonds, whose rights are taken into account by Russian depositories. Veon said in a statement that, although the bonds were issued by the holding, and VimpelCom is neither a debtor nor a guarantor for the bonds, on September 20 it received a letter from the RF Ministry of Finance, which “considers it expedient that PJSC ensure the fulfillment of obligations to Eurobond holders, whose rights are taken into account by Russian depositories”. The Ministry of Finance also demanded that Vimpelcom provide information on payments made in respect of the bonds.
Some Russian bondholders have already started litigation against Vimpelcom demanding payments.
In particular, Leader Management Company filed a lawsuit against the company for 1.75 billion rubles. also tried through the court to stop the sale of VimpelCom, but was denied interim measures. Later, the management company “First” (former “Sber Asset Management”) filed lawsuit against VimpelCom for 2.13 billion rubles. The management company “First” did not respond to a request. Kommersant was told at Leader Management Company that they did not own bonds maturing in 2023.
If VimpelCom, under pressure from the authorities or by court order, begins to make payments to the beneficial owners of bonds held in Russian depositories (most of the holders are from Russia), there may be a risk that Euroclear or Clearstream will not recognize the payment, Elena Mende explains: “Accordingly, , a conflict will arise when both Veon and VimpelCom will be required to pay the same amount of principal and interest twice on bonds, the rights to which are recorded in Russian depositories.
According to Ms. Mende, the risk of a double payment should be taken into account in the settlement of the deal with Vimpelcom’s top management. According to Kommersant’s sources, within its framework, the company will buy Veon bonds under the debt pushdown scheme and issue replacement bonds. However, as the interlocutor of Kommersant, who is familiar with the terms of the deal, explains, we are talking about replacing the wrong bonds for which Veon offers holders to postpone the maturity. The extension, another Kommersant source adds, gives Veon time to “focus on completing the agreed sale of VimpelCom before the current bond maturities expire.”
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