Seeking funds recovery from Russian bonds? New payment options for bondholders of Russian sovereign debt.
Due to sanctions, many investors are desperate for restructuring opportunities of their portfolio, where the foreign intermediaries cannot provide any services in paying bondholders of Russia’s sovereign debt. A recent Russian law has provided a temporary payment mechanism that will allow execution of payment obligations to Russian residents and foreign bondholders. It involves the transfer of funds to the National Settlement Depository (“NSD”).
There are 3 groups of bondholders, and the payment method will be different for each of them:
- Group 1: bondholders keeping records with the Russian depositary infrastructure (NSD or sub-depositaries);
- Group 2: bondholders keeping records with Russian depositaries that are clients of Foreign Depositaries;
- Group 3: bondholders keeping records with Foreign Depositaries. This group cannot be paid in accordance with standard procedures.
Group 1 can receive payment in RUB at the RUB exchange rate to the bond’s nominal currency established by the Bank of Russia on the date of payment.
Group 2 will receive payment like Group 1, but through corresponding Russian Depositaries without participation of foreign intermediaries.
Group 3 payments will be deposited by the NSD on special RUB type “I- accounts” in the NSD. The payment will be indexed at the foreign exchange rate for the bond’s nominal currency on the day of actual settlement.
Bondholders must follow a special identification procedure in order to receive their funds. This involves provision of documentation (either via the Foreign Depositary or by bondholder itself) and a waiver of potential claims against the Russian Ministry of Finance. The list of documentation is published in the Ministry of Finance Order № 245 of 24 June 2022.
Please feel free to contact us for further information or assistance on the subject.