VTB might transfer frozen assets to separate entity in 2024 pending legal changes
MOSCOW. June 7 (Interfax) - Russian state bank VTB might carry out a restructuring that will see it transfer blocked assets and liabilities to a separate legal entity in 2024, after legal changes that simplify this process are made, the lender's deputy CEO, Dmitry Pyanov told reporters.
"The only inorganic event that will have a significant impact on capital is a change to law 292 that will make it easier for us to spin off a special financial company with the transfer of blocked assets and liabilities there," Pyanov said.
VTB expects the relevant changes to the law to be submitted in 2023. "And this event, specifically reorganizational, will take place in 2024. We are not planning any other corporate, non-organic actions to increase capital adequacy, other than generating profit," Pyanov said.
He said VTB chose this option for working with blocked assets after "disappointment" in negotiations on swapping them with the authorities of the European Union and the United States.
"The stumbling block is the approval of the EU and U.S. sanctions authorities, theoretically speaking, within the context of major blocked assets directly owned by VTB Bank that have important social significance for certain European markets. For example, VTB Europe is a dead-end in our current understanding," Pyanov said.
In future, a legal entity might be set up outside of VTB Group and blocked assets and liabilities might be transferred to its books, he said. This issue will be discussed further.
"Besides legal aspects, an important consideration is that some foreign counterparties from unfriendly countries have the financial means and capability to repay their obligations to VTB Group entities, but have a sanctions risk assessment and VTB's sanctioned status does not allow them to do this. And, essentially, a transfer outside, to a third party could solve this problem, so I don't rule out this possibility," Pyanov said.
He recalled that VTB believes it is necessary to make several amendments to federal law No. 292-FZ. Firstly, the bank proposes to allow a restructuring with the transfer of blocked assets and liabilities to a separate entity to be done without a mandatory offer to minority shareholders who vote against or abstain from voting on this issue.
In addition, the law gives creditors the right to call in liabilities early with payment of all interest. "And we would like to not take exception to the fact that, perhaps, it makes sense to leave such a right in the law, [but] that it happen under contracts concluded with these clients prior to the decision on reorganization," Pyanov said, adding that VTB is now discussing these proposals with the Finance Ministry and Central Bank.
At the beginning of April, VTB called for lifting legal restrictions for clearing banks' balance sheets of blocked assets. Current regulation makes the challenge of such netting virtually impossible, the bank said.
Law 292-FZ, which went into effect in the summer of 2022, allows banks subject to sanctions restructure by setting up a new legal entity and transferring to it assets frozen due to sanctions, along with liabilities in the form of obligations to foreign creditors. After this, all payments on debts to nonresident clients are made only with the assets of the new company. This option expires on December 31, 2023.