28 Aug 2023 11:22

Broker again offers Russian holders of Veon Eurobonds buyout or swap for new Vimpelcom bonds

MOSCOW. Aug 28 (Interfax) - Alor Broker (Alor+ LLC) has for the second time made an offer to the holders of eight Veon Holdings B.V. Eurobond issues held through Russian depositories to buy back these bonds or exchange them for new exchange-traded bonds from mobile provider PJSC Vimpelcom, the broker said.

Bondholders who want to discuss a potential purchase have been asked to contact the broker by September 5, stating the number of Eurobonds they want to sell, complete chain of custody and preferred option.

Settlements will not provide for payment of previously paid coupon income that was not received by bondholders.

Veon cannot get any payments on Eurobonds to bondholders whose rights are recorded in Russian infrastructure because international clearing systems block such transfers to Russia's National Settlement Depository (NSD) due to sanctions against the country.

Resolving the issue with payments to Russian investors in Veon Eurobonds was one of the conditions the authorities set for approving the deal announced last November in which Veon intends to sell its Russian subsidiary Vimpelcom to local management. The agreement Veon concluded to sell Vimpelcom set the deadline for the deal at June 1, 2023.

In February-March, Alor Broker made an offer to holders of all Veon Eurobond issues who held the bonds through Russian depositories and in Russian infrastructure to buy out the bonds or swap them for new Vimpelcom bonds. The broker proposed two options.

Under the exchange option, bondholders could sell their Eurobonds at 100% of face value (plus accrued coupon income (ACI)) and simultaneously buy PJSC Vimpelcom bonds for the same amount. Under the other option, the Eurobonds would be bought out at 79.6% to 92.8% of face value (plus ACI), depending on the issue, and investors would not need to buy any new Vimpelcom bonds.

In its second offer to bondholders, the broker said it proposes that the bonds be repurchased "according to one of the two previously published options."

Vimpelcom said in a report published at the end of March that it bought out Veon Eurobonds totalling $1.26 billion and 23.9 billion rubles in February-March, and issued exchange traded and commercial bonds with combined face value of 119.3 billion rubles in the same period.

Veon reported in early May that Vimpelcom bought out Eurobonds with combined face value of $1.6 billion, which is comparable to the figures reported by Vimpelcom.

Digital Development Minister Maksut Shadayev said in February that the government commission for foreign investment approved the deal on the condition that Vimpelcom buy back at least 90% of Veon Eurobonds from Russian investors.

An estimated $2.3 billion-$2.4 billion worth of Veon Eurobonds were held locally, Renaissance Capital chief debt market analyst Alexei Bulgakov said in a report. The share of exchanged Eurobonds held through Russian infrastructure is therefore about 70%, well short of the necessary 90%.

The Russian holders of Veon's Eurobonds filed a whole series of lawsuits in arbitration courts while the group negotiated the fate of its key asset with the authorities. Claims against Vimpelcom were filed by Leader Management Company, Transfingroup (TFG), First Asset Management, Rosgosstrakh Life and AAA Capital Management. First Asset Management withdrew its claims against the company in mid-April, saying that all the Eurobonds it trust managed were repurchased.

The court dismissed the lawsuits of Leader and TFG in July. Both cases were heard behind closed doors at the request of Vimpelcom, which argued that the plaintiffs presented excerpts from the minutes of a meeting of the subcommittee of the government commission for control over foreign investment. Therefore, the case records only show the rulings, without laying out the court's reasoning. Leader and TFG filed appeals against the rulings in August.

Leader was one of the first to sue Vimpelcom over the servicing of Veon Eurobonds, in early September 2022. TFG filed its lawsuit almost three months later. At the time the lawsuits were dismissed, Leader's claims against Vimpelcom had dropped to 179.7 million rubles from 1.757 billion rubles. TFG's claims were more modest, totalling about 127 million rubles.

Not all investors were happy with the proposed terms of the bond repurchase and exchange. For example, insurer Sogaz , whose subsidiary Sogaz Life owns Eurobonds from two Veon issues, said the bond buyout by Vimpelcom was carried out on non-market terms and the issuer's actions constitute "clear discrimination against the rights of Russian investors justified by a loose interpretation of the decisions of government bodies.

Sogaz sent a letter with its concerns and a proposal to work out measures to secure the rights of Eurobond holders to the Economic Development Ministry, sources told Interfax. The ministry said at the time that it had seen Sogaz's letter, but that issues related to the activities of the government commission on foreign investment fall under the authority of the Finance Ministry, on the basis of which the commission operates. The Finance Ministry did not respond to questions from Interfax.

On the eve of the deadline for closing the sale of its Russian subsidiary, Veon reported that it sent the necessary documentation for annulling company Eurobonds owned by Vimpelcom to Euroclear, Clearstream and registrars. The company is thus entering the final stage of closing the sale of its Russian assets that was announced last November, Veon said.

Veon CEO Kaan Terzioglu said in a conference call on Q2 results at the beginning of August that he was stepping down from Vimpelcom's board of directors. As for closing the sale of the Russian assets, he said the group was continuing to appeal to European regulators to annul the Eurobonds purchased by Vimpelcom.

Terzioglu said Veon realizes the importance of completing the deal before the next Eurobond maturity date in October 2023, but he did not provide any details about whether the deal will be closed by then.