23 Jun 2022 13:16

Russia's Finance Ministry remits payment on 2027 and 2047 Eurobonds using new settlement arrangement in rubles

MOSCOW. June 23 (Interfax) - Russia's Finance Ministry has transferred rubles to the National Settlement Depository (NSD) in order to remit payment on the country's 2027 and 2047 Eurobonds as part of the new arrangement for servicing sovereign external debt, as approved by presidential decree, the ministry said in a statement.

JSC National Settlement Depository, the paying agent for the Eurobonds, has received funds totaling 12.51 billion rubles, equivalent to $234.85 million, the Finance Ministry said.

Consequently, the obligations have been completely fulfilled, the Finance Ministry said.

The ministry said it was switching to a new procedure for payments on Eurobonds, as approved by a presidential decree of June 22, due to the "non-fulfilment by foreign counterparties of their commitments to conduct payments for the settlement of Russian public debt."

The ministry will, as previously, in accordance with the issuance documentation, ensure that funds are transferred to the payment (fiscal) agent, whose functions will be performed by NSD in accordance with Russian law.

The ministry, in order to uphold the interests of investors, on the date of coupon payment and/or redemption of the Eurobond nominal value specified in the issuance documentation and in order to avoid non-fulfillment of debt obligations on them, will transfer the ruble equivalent of the amount of the corresponding payment to NSD.

The ministry split Eurobond holders into three groups depending on the infrastructure that records their ownership rights.

Funds will be transferred to the first group of Eurobond holders, whose ownership is recorded by NSD or Russian depositories without the participation of foreign depositories, that is, completely within the Russian accounting system, in accordance with the procedure provided for in Article 8.7 of the Law on the Securities Market," that is, in "cascading payments".

Funds will be transferred to the second group of Eurobond holders, whose ownership is recorded by Russian depositories with the participation of foreign ones, by the NSD via such Russian depositories, bypassing foreign intermediaries, after these Russian depositories disclose information on the number of securities recorded in relation to their depositors by the prescribed deadline upon the NSD's request.

Payments will be transferred to first- and second- group bond holders at the exchange rate of the ruble against the nominal currency set by the Bank of Russia on the date of payment determined by the issue documentation. Such an approach will ensure the maximum equivalence of payments provided for by issue documentation in the nominal currency.

Funds leftover after transfers in favor of first- and second-group bondholders will be credited by NSD to a special ruble Type "I" account, from which payments will be made to third-group holders who are unable to transfer funds within the framework of standard procedures due to non-fulfillment by foreign settlement and clearing organizations of their obligations.

"In order to strictly comply with the Eurobonds obligations undertaken by the Russian Federation, the funds on the said account will be indexed at the current market exchange rate of the nominal currency until actual settlements with the owners are made," the MinFin said.

No claims

According to the ministry's clarifications, as well documents confirming ownership of Russian MinFin Eurobonds, their foreign owners will have to provide a waiver of future claims for the payment made under the new arrangements.

"To receive funds from the said account [Type "I"] third-group holders or foreign nominal holders recording ownership in favor of this category of holders will have to apply to NSD or another organization authorized by the Russian government and provide documentary evidence of rights to Eurobonds as of the date of record of holders, providing information on the entire relevant chain of nominal holders of Eurobonds up to the foreign nominal first level holder. A written waiver of all potential claims against the issuer in the future regarding the relevant payment is provided simultaneously with the package of documents," the ministry said.

After documents have passed the verification procedure and if the NSD has no doubts about ownership rights, then, upon request by third-group holders or nominal holders, payments in rubles will be made in via authorized credit institutions to the "personal" bank accounts of the holders according to the details provided (in the absence of a ruble account, one would have to be opened) in amounts equivalent to due payments in the currency of the Eurobond nominal value on the date funds are credited. The indexation of funds ceases the moment funds are credited to the "personal" ruble account of third-group holders or their nominal holders.