Rostelecom to change terms for Deutsche Bank option due to falling ruble, share price
MOSCOW. Aug 5 (Interfax) - Rostelecom and Deutsche Bank will alter conditions for payments under share options which were agreed on when the bank became a Rostelecom shareholder in October 2013.
The partners were forced to make the change due to the sharply changing market conditions.
The Rostelecom board of directors on Thursday will consider approving a new contract of guarantee with Deutsche Bank, and decide the voting position at Rostelecom International Ltd (100% owned by Rostelecom) shareholder meetings, the state telco said.
In October 2013, the Russian Direct Investment Fund (RDIF) and Deutsche Bank acquired 2.7% of ordinary Rostelecom shares from Mobitel [100% Rostelecom subsidiary] on terms of co-investing in various amounts (1.35% each). The shares were bought at 106.3 rubles per share at a total price of 7.67 billion rubles.
Two-year option agreements were signed in the framework of the deal, which offer investor protection and possible participation in growth of Rostelecom shares. The agreements provided a guaranteed annual return on investments of 3% in dollars. If by October 2015 Rostelecom shares do not grow in price accordingly, then Rostelecom International would have had to pay investors the difference between the purchase price and strike price. An annual return of more than 15% would have been equally divided between investors and Rostelecom.
"In connection with the devaluation of the ruble and the unfavorable market conditions, the board of directors is discussing further steps to correct the terms earlier than the conditions of previous agreements," a Rostelecom representative told Interfax. The representative declined to comment ahead of the board decision on how they will change the conditions of the options.
Rostelecom is not disclosing the current size of the Deutsche Bank stake. Last year the bank sold a significant share of Rostelecom shares through a buyback, which Rostelecom held following a vote by shareholders on reorganization by spinning off mobile assets. Ordinary shares were bought at a price of 123.93 rubles per share. The RDIF took part in the buyback as it sold 0.22% ordinary shares to Rostelecom, and currently controls 1.13%.
A source with knowledge of the situation told Interfax that the revision of the terms of the option so far concerned Deutsche Bank, and that talks with the RDIF were ongoing. The RDIF has so far not commented on the options question.
