Russian issuers are looking for ways to settle with shareholders

Russian issuers are looking for ways to settle accounts with shareholders.

Russian companies are looking for, and are gradually finding, alternative ways to fulfill their obligations to bondholders. The current legislation provides a number of opportunities to bring dividends to investors from the Russian Federation, but issuers remain at risk of default on bonds, which may lead to asset seizure. Companies choose different ways to solve this problem, for example, some simply observe and wait for an acceptable mechanism to appear, while others try to get approval for payments in domestic currency, and still others try to buy bonds from foreign investors.

In the spring of this year, international clearing companies stopped servicing the accounts of the National Settlement Depository, and later sanctions were imposed on NDRs, which legalized the previously introduced restrictive measures. This means that operations on securities held in the depository have been suspended, including payments on Eurobonds.

Russian laws make it possible for investors to make payments in domestic currency through NSD (the so-called National Settlement Depository for short), without the use of international systems. Domestic legislation also allows the issuance of "substitute" bonds in a simplified manner. But the conditions agreed with investors establish the only option for making payments, only through international depository and clearing systems.

If alternative methods are not agreed with the holders, Russian companies run the risk of being held liable for the entire amount of the issue or even double its amount.

Some issuers plan to approach investors and try to negotiate a change in the terms of payment, for example, by using a different currency in settlements with a number of investors. The procedure for mutual approval of changing the terms of interaction on Eurobonds is called consent solicitation, many Russian companies consider it as a way of restructuring securities.

Eurobond obligations most often provide for the consideration of disputes in international arbitration. This threatens to impose such a measure of liability as disclosure of accounts and seizure of assets, in addition to collecting the entire amount of the debt. Some issuers have already received the consent of the holders to change the settlement mechanism, others have issued "substitute" bonds, but the risks remain, despite the government's relaxations, which are not technically worked out.

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