Russia ready to resolve claims of investors who expected extra interest on 2022 Eurobonds

MOSCOW. June 2 (Interfax) - Russia's Finance Ministry is prepared to consider and, if there are grounds, to resolve the claims of investors regarding payment of additional interest on the Russia-2022 Eurobond issue, the ministry said.

Earlier this week the Credit Derivatives Determinations Committee ruled that there had been a failure-to-pay event on Russia's sovereign Eurobond issue maturing in 2022 because Russia had failed to pay $1.9 million in interest. The date of the failure-to-pay event was May 19, the committee said.

Russia was supposed to redeem the issue of dollar-denominated Eurobonds on April 4. Part of this issue was bought back by the Finance Ministry from Russian bondholders for rubles. Russia had also planned to settle up with remaining investors in rubles, since the United States had barred the use of frozen Russian foreign currency reserves for foreign debt payments.

However, just before the end of the 30-day grace period, the Finance Ministry nonetheless transferred the payments in U.S. dollars. The terms of this bond issue stipulate that interest on the principal debt continues to accrue until it is repaid. Thus, Russia must pay investors an additional $1.9 million in interest accrued during the grace period. Bondholders complained to the committee when Russia failed to pay this amount.

The Russian ministry said that the funds were conveyed to investors after the date set by the issue documentation for this payment because the ministry's foreign counterparties improperly performed their duties in the redemption of these bonds.

However, the delay with this payment, due exclusively to the unlawful actions of foreign financial intermediaries, is seen by some investors as the result of the issuer's intentional use of borrowed funds beyond the established deadline, the ministry said.

The ministry said it is "prepared to consider and, given the existence of the necessary grounds, to resolve all claims regarding the complete fulfillment of debt obligations on the Russia-2022 Eurobonds on a bilateral basis."