MTS obtains consent from $750-mln bond holders to lift covenants
MOSCOW. Feb 16 (Interfax) - MTS International Funding Ltd., which is a subsidiary of Mobile TeleSystems (MTS) , has obtained the consent of the holders of $750 million in Eurobonds maturing in 2020 to lift covenants on the issue, the telco said in a statement.
MTS International Funding will pay note-holders who consented by February 9 a consent fee of $2.5 per $1,000-note and those who consented by February 11 a fee of $1.
The covenants allowed investors to demand early buyback in the event of technical default. That entitlement could have arisen in connection with a court case concerning Kyrgyz cellular operator Bitel.
The London Court of International Arbitration recently turned down an appeal by MTS against an order for its subsidiary MTS Finance to purchase 49% in Tarino Ltd. from Nomihold Securities. Tarino held 100% in Kyrgyz cellular operator LLC Bitel in 2005.
MTS acquired 51% in Tarino Ltd at the end of 2005 for $150 million and signed an option for purchasing the remaining 49% for $170 million. The amount currently includes an additional $5.88 million in dividends in favor of Nomihold, which are foreseen by an option agreements, as well as compensation for the costs incurred from late fulfillment of requirements. However, the company soon lost operational control of Bitel.
MTS on January 24 announced an offer to buy up $400 million in Eurobonds maturing in January 2012 and asked note-holders to agree to lift all covenants attached to the bond issue. Note-holders tendering securities for purchase automatically consent to lift the covenants.
MTS also requested that the noteholders vote for changing the covenants for $750 million in Eurobonds slated for maturity in 2020 that had been issued by MTS International Funding Ltd. The decision had to be approved by a simple majority of votes from 75% of the note-holders.
Back in 2006, the owners of the Sistema holding, which owns the controlling interest in MTS, said they were prepared to compensate the cellular provider's possible losses if it was ultimately forced to pay Nomihold Securities the $170 million it is demanding.
But Sistema chief Vladimir Yevtushenkov said last week that the holding's shareholders would not now be idemnifying MTS and that the term of the guarantee had expired "long ago."