Finance Ministry replaces Russian sovereign Eurobonds equivalent to $20.8 bln, representing 64.2% of original issue' nominal value
MOSCOW. Dec 6 (Interfax) - The Finance Ministry has completed the process of replacing 13 issues of sovereign Eurobonds, the ministry said.
As part of the operation, Russian Eurobonds with a total nominal value equivalent to $20.8 billion, which includes the amortization structure of bonds maturing in 2030, or 64.2% of the dollar-equivalent nominal volume of all original Russian Eurobond issues, were replaced, the ministry said.
The remaining Russian Eurobonds, with a nominal value of $11.6 billion (also taking into account amortization), will continue to circulate on the secondary market and will be serviced according to the current procedures established by the presidential decree of September 9, 2023, the ministry said.
"Thanks to the replacement of Russian Eurobonds, investors who participated in this operation will no longer face difficulties caused by the unfriendly actions of foreign clearing and settlement organizations, including problems with the secondary circulation of the respective debt instruments and receiving due payments," Finance Minister Anton Siluanov was quoted as saying.
All rights of such investors in Russian sovereign debt obligations are now securely protected by Russian financial infrastructure, and the replacement will serve as a strong foundation for the qualitative and comprehensive development of the national debt market, he said.
According to the Finance Ministry's data, the replacement ratio exceeded 70% for ten issues, while for the three longest-maturity issues with maturities in 2042, 2043 and 2047 it was below 50%.
The highest replacement ratio, nearly 90%, was achieved in the Russia 2030 Eurobond issue. Over 80% of Eurobonds were replaced in the dollar-denominated issues maturing in 2028 (80.9%) and 2029 (83.4%), as well as in the euro-denominated issue maturing in 2032 (82.1%). The largest replacement bond issues by volume were those maturing in 2035 ($2.873 billion, a replacement ratio of 71.8%), 2047 ($2.651 billion, a replacement ratio of 37.9%), 2029 ($2.5 billion) and 2026 ($2.321 billion, a replacement ratio of 77.4%).
The Finance Ministry announced the launch of the sovereign Eurobond replacement procedure on September 6. The coupon yield, frequency of payments, maturity and nominal value of the replacement Eurobonds will match the corresponding terms of the replaced Eurobonds.
Investors could receive replacement bonds either by exchanging their Russian Eurobonds or by transferring rights to them. The latter option was available to holders whose rights to the bonds were recorded by foreign depositories.
The ownership cutoff date for participation in the replacement process was September 12, 2024. Replacements of sovereign Eurobonds purchased between August 8 and September 12 were subject to conditions specified by a presidential decree, the Finance Ministry said. The presidential decree outlining the procedure for replacing Russian Eurobonds was published on August 8. It mandates separate accounting for replacement bonds obtained from replacing Eurobonds acquired after the decree took effect on August 8 if the bondholders during this period were foreign creditors from unfriendly countries. Separate accounting is not required if transactions were conducted with permission stipulated by presidential decrees or if the replaced Eurobonds were purchased on organized exchanges or from holders or trustees who were not foreign creditors, provided the rights to the bonds were recorded by a Russian depository.
REPLACEMENT AT THE MARKET'S REQUEST
The Finance Ministry began actively preparing for the replacement of sovereign Eurobonds last year.
In July 2023, the State Duma approved amendments to the Budget Code proposed by the Finance Ministry, granting the government authority to replace outstanding sovereign Eurobonds with new local issues under similar terms, subject to the agreement of bondholders.
The ministry initially planned to begin the replacement procedure in Q4 2023 but later postponed it to 2024 due to the heavy workload on organizers and infrastructure involved in replacing corporate borrowers' Eurobonds, a process that continued until August.
In early August, Russian President Vladimir Putin signed a decree defining the conditions for replacing sovereign Eurobonds. At the end of the month, the government approved the replacement process for 2024 and issued a corresponding instruction. In early September, the Finance Ministry announced the launch of a large-scale replacement process for all 13 Russian Eurobond issues.
The ministry initiated the sovereign Eurobond replacement process at the request of the market, Deputy Finance Minister Vladimir Kolychev said.
"There were requests to improve the liquidity of our onshore Eurobond market. Perhaps we prepared somewhat slowly, but we are doing this to make our onshore market more liquid," Kolychev said in October at the Moscow Financial Forum.
