A Russian corporate lobby has developed a plan to avoid bond defaults. Unfortunately, that’s happening when some of the country’s largest companies struggle to get money from investors.
Companies such as steelmaker Severstal and Russian Railways have missed a payment deadline on foreign debts. This was mainly due to international banks’ slow processing of transactions, which fear violating international sanctions against Russia.
The Union of Industrialists and Entrepreneurs wants to prevent a wave of defaults and freezes of foreign assets. Therefore, the agency said that the paying agent and registry for the bonds should be assigned to the Moscow-based National Settlement Depository. This must be done with the consent of a majority of bondholders.
Transferring responsibility should prevent foreign creditors from accusing companies of default if payments are delayed. Non-Russians could also receive payments for the bonds in special foreign-currency accounts at Russian banks under the plan. The Union proposal has been submitted to the Russian central bank and the government.
According to experts, changing the terms of debt through a vote among bondholders is unique. Especially because each loan has a different threshold. More than 50 percent of the loans are in the hands of Russian holders. This will allow many companies to make the changes legitimately.