21 Apr 2022 09:20

VTB pays coupon on subordinated dollar Eurobonds in rubles

MOSCOW. April 21 (Interfax) - Russian state bank VTB has paid the coupon on dollar-denominated subordinated Eurobonds in rubles, using the mechanism introduced by a presidential decree that allows bond payments to investors from countries that have joined sanctions against Russia to be paid in rubles to special "C" type accounts.

VTB made the interest payment on the Eurobonds, totalling over $52 million, on April 15 in rubles at the Central Bank's exchange rate, VTB executive board member Dmitry Pyanov told reporters.

"The payments were made on the coupon of T2 subordinated debt, meaning this is not perpetual but term debt in U.S. dollars. This is one of four of our Eurobond issues carried out before 2014; three of them were done in dollars and one in Swiss francs. They were issued by foreign issuers that are located in either Luxembourg or Ireland," Pyanov said.

"We, as a bank subject to blocking sanctions, completely cut off from foreign payment infrastructure in U.S. dollars, cannot make payments in foreign currency for reasons beyond our control. Moreover, there is a ban on making direct foreign currency payments under the 95th presidential decree. Therefore, we could not make the payments in foreign currency. So we approached the Central Bank in good time and received a response that allowed us to carry out the following payment arrangement," Pyanov said.

He said the interest payment in rubles was made in two tranches, with the first calculated based on information from the settlement depository in the amount that corresponded to payments due to Russian residents or residents of friendly countries. They received the payments, which totalled the equivalent of $27 million, in rubles.

The other $25 million was due to residents of "unfriendly" countries and, in line with the presidential decree, was deposited into "C" type accounts in rubles at the Central Bank exchange rate.

"Accordingly, our counterparties from unfriendly countries received this payment blocked. By the logic of the presidential decree, they are supposed to appeal to their governments to unblock the assets of the Russian Federation. If these countries unblock these funds then they can be eligible to receive the coupon payment," Pyanov said.

"I believe that this is a unique, never before implemented option for payment of interest on Eurobonds by a sanctioned bank that essentially fully complies with the Russian president's decree No. 95 and ensures payment of the coupon, at least in rubles at the Central Bank rate, to Russian residents and residents of friendly countries," he said.

"We made the payments in the currency that was available to us and using the financial infrastructure that is accessible to us, in accordance with the regulation that we are subject to," Pyanov said.

He said VTB plans to use the mechanism for making payments on foreign currency debt in rubles for its other Eurobond issues as well. The bank's next payments on Eurobonds are due in June.