Holders of default bonds of Russian Standard, a company registered in the British Virgin Islands and part of Rustam Tariko's group, initiated a pre-trial claim against shareholders of Russian Standard Bank, 49% of whose shares are pledged as collateral for bonds. The claim was submitted by the trust manager of the pledged stake, London-based Citibank. He demanded to pay off the debt in full, otherwise he promised to take legal action to collect the bail.
RBC got acquainted with the claim against the pledgers, as well as with the notification of its direction sent to the bondholders (the authenticity of the documents was confirmed by a RBC source familiar with the creditors' plans). Russian Standard's debt on bonds rose to $ 757 million (principal debt - $ 544 million, interest - $ 212 million), the claim said. Seven-year bonds of Russian Standard for $ 451 million were placed in 2015 at a rate of 13% per annum. Payments were tied to the profitability of Russian Standard Bank, while it was not profitable, the amount of debt increased. Russian Standard was supposed to pay the first coupon in November 2017, but made the first default.
The security agreement was concluded under Russian law. The claim is sent with reference to the provision of the Arbitration Procedure Code of Russia, which states that civil disputes on the recovery of funds can be brought to court after the parties have taken pre-trial settlement measures after 30 days from the date of the claim.
In its pre-trial claim, Citi notes that the issuer failed to pay interest on the bonds twice, giving the collateral manager the right to recover it. Under the terms of the agreement, when collecting collateral, Citi must determine the price of the shares to be recovered, which must not be lower than their market price. Citi has already hired Ernst & Young to assess the market value of 49% of Russian Standard Bank, the same notice says. The bank's shareholders are Russian Standard Company CJSC and Russian Standard-Invest LLC, the ultimate beneficiary of both is Rustam Tariko. Citi's press service declined to comment.
“According to our instructions Citibank sent the relevant pre-trial demand to the pledgers last week. A lawsuit will be filed in 30 days, "David Nitlispach, representative of the Swiss fund Pala Assets, told RBC. Pala, the fund of the former co-owner of Mechel, Vladimir Yorich, has collected more than 25% of default bonds. Nietlispach confirmed that Citi, on instructions from bondholders, hired E&Y to assess the value of the collateral. The limitation period for the first default of Russian Standard expires on October 27, 2020.
“The letter from Citi representatives has been received and is under consideration; there has been no official information on the hiring of an appraiser or further plans from Citi. The issuer is in contact with the trustee and bondholders and is still open to a mutually acceptable settlement of the situation, ”a representative of Russian Standard told RBC.
No vote
The fact that the fund collected more than 25% of the bonds accelerated the collection process. Pala Assets, together with the trust manager and legal adviser, has developed an approach in which the issue of collection will not be put to the general vote of bondholders, which will significantly shorten the time of the process, explained Nitlispach. He noted that Citibank's work is paid in proportion to a group of securities holders, which, in addition to Pala, includes the American fund Amundi Pioneer (under management of $ 77.8 billion in assets) and another fund from the United States. The Group is being advised by A1 investment company (part of Mikhail Fridman's Alfa Group). A1 declined to comment.
RBC sent inquiries to the press service of the Roust holding Rustam Tariko and Amundi Pioneer.
“Basically, this is [Citibank's notification to bondholders] informing that the trustee has sent the claim to the pledgers. The term of collection will depend on the speed of actions of the trust and on the intentions of the pledgers to challenge each step. It would be wrong to even determine the approximate timeframe, "said Andrei Rozhkov, investment analyst at Miriad Rus, to RBC, noting that Tariko did not offer bondholders a new settlement agreement. Miriad Rus represents minority bondholders on a committee of over 35 bondholders formed by the company with a total stake of about 9.8% at par.
Previously, analysts at investment bank J.P. Morgan has tried to calculate the potential return that investors in Russian Standard bonds could receive if the collateral is collected. Experts have estimated the entire bank at 0.7 capital, or 17.6 billion rubles. Based on this estimate, creditors can expect a return of about 30% of the bond par value, that is, RUB 8.6 billion, or $ 131 million.
RBC got acquainted with the claim against the pledgers, as well as with the notification of its direction sent to the bondholders (the authenticity of the documents was confirmed by a RBC source familiar with the creditors' plans). Russian Standard's debt on bonds rose to $ 757 million (principal debt - $ 544 million, interest - $ 212 million), the claim said. Seven-year bonds of Russian Standard for $ 451 million were placed in 2015 at a rate of 13% per annum. Payments were tied to the profitability of Russian Standard Bank, while it was not profitable, the amount of debt increased. Russian Standard was supposed to pay the first coupon in November 2017, but made the first default.
The security agreement was concluded under Russian law. The claim is sent with reference to the provision of the Arbitration Procedure Code of Russia, which states that civil disputes on the recovery of funds can be brought to court after the parties have taken pre-trial settlement measures after 30 days from the date of the claim.
In its pre-trial claim, Citi notes that the issuer failed to pay interest on the bonds twice, giving the collateral manager the right to recover it. Under the terms of the agreement, when collecting collateral, Citi must determine the price of the shares to be recovered, which must not be lower than their market price. Citi has already hired Ernst & Young to assess the market value of 49% of Russian Standard Bank, the same notice says. The bank's shareholders are Russian Standard Company CJSC and Russian Standard-Invest LLC, the ultimate beneficiary of both is Rustam Tariko. Citi's press service declined to comment.
“According to our instructions Citibank sent the relevant pre-trial demand to the pledgers last week. A lawsuit will be filed in 30 days, "David Nitlispach, representative of the Swiss fund Pala Assets, told RBC. Pala, the fund of the former co-owner of Mechel, Vladimir Yorich, has collected more than 25% of default bonds. Nietlispach confirmed that Citi, on instructions from bondholders, hired E&Y to assess the value of the collateral. The limitation period for the first default of Russian Standard expires on October 27, 2020.
“The letter from Citi representatives has been received and is under consideration; there has been no official information on the hiring of an appraiser or further plans from Citi. The issuer is in contact with the trustee and bondholders and is still open to a mutually acceptable settlement of the situation, ”a representative of Russian Standard told RBC.
No vote
The fact that the fund collected more than 25% of the bonds accelerated the collection process. Pala Assets, together with the trust manager and legal adviser, has developed an approach in which the issue of collection will not be put to the general vote of bondholders, which will significantly shorten the time of the process, explained Nitlispach. He noted that Citibank's work is paid in proportion to a group of securities holders, which, in addition to Pala, includes the American fund Amundi Pioneer (under management of $ 77.8 billion in assets) and another fund from the United States. The Group is being advised by A1 investment company (part of Mikhail Fridman's Alfa Group). A1 declined to comment.
RBC sent inquiries to the press service of the Roust holding Rustam Tariko and Amundi Pioneer.
“Basically, this is [Citibank's notification to bondholders] informing that the trustee has sent the claim to the pledgers. The term of collection will depend on the speed of actions of the trust and on the intentions of the pledgers to challenge each step. It would be wrong to even determine the approximate timeframe, "said Andrei Rozhkov, investment analyst at Miriad Rus, to RBC, noting that Tariko did not offer bondholders a new settlement agreement. Miriad Rus represents minority bondholders on a committee of over 35 bondholders formed by the company with a total stake of about 9.8% at par.
Previously, analysts at investment bank J.P. Morgan has tried to calculate the potential return that investors in Russian Standard bonds could receive if the collateral is collected. Experts have estimated the entire bank at 0.7 capital, or 17.6 billion rubles. Based on this estimate, creditors can expect a return of about 30% of the bond par value, that is, RUB 8.6 billion, or $ 131 million.
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