1 Dec 2023 12:50

Russia's NSD signs contract with Belarusian MinFin, depository for payments on sovereign Eurobonds

MOSCOW. Dec 1 (Interfax) - Russia's National Settlement Depository (NSD) has signed a service contract with the Belarusian Finance Ministry and Central Securities Depository for arranging the transfer of payments on securities that is needed to make payments on Belarusian sovereign Eurobonds.

The NSD said it notified depositories of this on November 30. The Belarusian Finance Ministry said at the end of October that it was working out a mechanism with the NSD to pay Russian holders of the Belarusian Eurobonds.

"For holders whose rights to Eurobonds are recorded in the Russian depository system, these functions can be carried out by the National Settlement Depository. It is proposed that the Russian depository act as a 'single window' and ensure the collection of information from holders, blocking of Eurobonds in their accounts, transfer of all information to the Belarusian central depository and, ultimately, transfer of the securities to the issuer's account and the money (principal and interest) received from the Belarusian side to holders in Russia,' the ministry said on its website at the time.

Belarus has four outstanding Eurobond issues totaling $2.45 billion. Russian bondholders have been complaining for months about being unable to receive payments they are due on sovereign Belarusian Eurobonds. This refers both to coupons on all the outstanding issues and the principal debt of $800 million on the 2023 issue, which the Belarusian Finance Ministry redeemed in February. Bondholders have appealed to various regulatory bodies and some have even attempted to initiate legal proceedings in Russian arbitration courts, but these attempts have been unsuccessful so far.

A resolution of the Belarusian Cabinet and National Bank was published in early September that clarified the procedure for fulfilling obligations on the country's sovereign Eurobonds. It listed three possible options: exchanging Eurobonds for domestic government bonds with the Eurobonds being cancelled; a buyout of Eurobonds at 30% of face value; or receiving payment on Eurobonds in Belarusian rubles.

The last option is available to those who acquired Eurobonds prior to September 6, 2022, is not a resident of an unfriendly country and can ensure transfer of the Eurobonds to the Belarusian Finance Ministry in trusted depository.

Belarusian Finance Minister Yury Seliverstov said that the country will pay its obligations to Russian bondholders after they enter into agreements with the NSD and expects to begin payments before the end of the year.

The Central Bank of Russia (CBR) said at the end of last week that its board of directors had confirmed a decision needed to launch a mechanism to pay Russian holders of Belarusian sovereign Eurobonds maturing in 2023 in Belarusian rubles.

The CBR said payments "will be made in Belarusian rubles, bypassing foreign institutions."

The NSD will compile a list of holders of Eurobonds being redeemed and send it to the Belarusian central depository. The investor will have to submit an application to this depository, directly or through the Russian depository, stating that they wave claims against the issuer. Furthermore, the investor will need to confirm their "friendly" status and that they owned the bond on September 6, 2022 and on the date of redemption, the CBR said.

This will enable the Belarusian Finance Ministry, after verifying the documents, to send money to the NSD for subsequent transfer to investors through the chain of Russian depositories, the CBR said. The redeemed Eurobonds will be debited from the accounts of bondholders and credited to the Belarusian Finance Ministry's account at the NSD.