13 Sep 2023 14:57

VEON agrees amendments to deal terms with buyer of VimpelCom, would like to complete formalities before Oct 13

MOSCOW. Sept 13 (Interfax) - The VEON telecoms holding and the buyer of its Russian asset, a company owned by local management headed by Alexander Torbakhov, have agreed on amendments to the deal on acquisition of VimpelCom, VEON said in a statement.

These amendments relate to settlements between the parties - the transaction is paid for by transferring the holding's Eurobonds acquired by VimpelCom from Russian investors to the balance sheet of the VEON entity, VEON said.

The company expects all formalities necessary for the closing of the sale to be completed ahead of the October 13 maturity of VEON's October 2023 bonds.

VEON said U.S. and other regulatory approvals have been received for the transfer of approximately 95% of the bonds, which will be transferred immediately prior to the closing of the sale. The remaining bonds will be transferred as soon as the outstanding regulatory approval is in place, which may occur post-closing. VEON said earlier that the deal would be paid "mainly" by transferring bonds, but now says the entire consideration for the sale will be satisfied by transferring the bonds.

VEON also issued two redemption notices for the early payment of the company's bonds maturing in December 2023 and June 2024 on September 27. The Issuer will redeem all the notes at full principal amount plus accrued interest. Holders of the 2023 bonds will also receive a premium of 2% for their consent to extend the term of this issue.

The issuer intends to complete any formalities relating to the delisting of the June 2024 bonds from the Luxembourg Stock Exchange as soon as possible following the redemption of the outstanding June 2024 bonds on the redemption date.

VEON cannot currently convey payments on Eurobonds to investors whose bonds are held through Russian infrastructure, since international clearing systems are blocking such transfers to the National Settlement Depository due numerous sanctions imposed against Russia.

Resolving the issue of payments to Russian holders of VEON Eurobonds was a condition for the authorities to agree on a deal to sell its Russian subsidiary, VimpelCom, to local management, announced in November last year. VEON entered into an agreement to sell VimpelCom by June 1, 2023.

Alor Broker (Alor+ LLC) in February-March proposed to all holders of VEON Holdings Eurobonds maturing in 2023, who as of January 31 kept their Eurobonds in Russian depositories and in Russian infrastructure, to buy out the bonds or swap them for new ruble bonds of VimpelCom.

Under one exchange option, bondholders could sell their Eurobonds at 100% of face value plus ACI and simultaneously buy VimpelCom bonds maturing on February 14, 2028 for the same amount. Under a second option, the Eurobonds would be bought out at less than face value plus ACI and investors would not need to buy any VimpelCom bonds; the price ranged from 79.6% to 92.8% of face value, depending on the issue.

VimpelCom said in a report at the end of August that it had bought back Eurobonds issued by VEON with a total face value of $1.26 billion and 25.2 billion rubles as of June 30. Another $88.2 million of Eurobonds were repurchased between July 1 and the date of the report.

Alor Broker at the end of August for the second time made an offer to the holders of eight VEON Holdings Eurobond issues held through Russian depositories to buy back these bonds or exchange them for new exchange-traded bonds from mobile provider VimpelCom.

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.

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.

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 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, totaling about 127 million rubles.

Leader and TFG filed appeals against the rulings in August.

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 has not commented publicly on the situation.