Russian Central Bank clarifies procedure for Eurobond payments to holders whose rights are accounted for by Russian depositories
MOSCOW. July 11 (Interfax) - The Central Bank of Russia (CBR) has clarified the procedure for Russian legal entities to render payments on Eurobonds to investors whose rights are recorded by Russian depositories, the CBR said in a statement.
Russian President Vladimir Putin had earlier signed a decree by which Russian borrowers with Eurobonds in circulation are required to ensure fulfilling their obligations to those holders whose rights are recorded in Russian depositories, either according to the procedure established by the CBR's board of directors, or by transferring new local bonds to investors in place of Eurobonds.
According to the regulator's statement, the CBR's board of directors has established the following procedure for fulfilling Eurobond obligations: a Russian legal entity that has obligations related to Eurobonds sends a request to the Russian depository (central depository) in order to obtain information about the holders of Eurobonds; and once the depository has provided the information, the legal entity then transfers the funds to the depository in order to fulfill the Eurobond obligations, and then the depository transfers the funds to the bondholders.
Russian companies have faced many complications with fulfilling their Eurobond obligations amid the introduction of unprecedentedly tough sanctions imposed against Russia.
Foreign correspondent banks and agent banks freeze the payments of companies that are on the sanctions lists themselves or their owners appear on them. Consequently, borrowers who are ready to remit Eurobond payments do not have the technical ability to do so through the regular channels.
Russian borrowers until recently did not have a single, unified payment system for Eurobonds. Some of them have continued to remit payments in foreign currency, though these payments only reach foreign holders of securities, since international settlement systems have ceased transferring payments to Russia's National Settlement Depository (NSD). Other companies and banks have begun to pay Eurobonds in rubles. These are mainly borrowers who find themselves subject to some kind of sanctions and are unable to use the international infrastructure for payments.