Russia: Alternative methods of payments applied to Eurobonds issued by Russian issuers in non-RUB currencies - Update
Note: This announcement, originally published on 23 November 2022, has been updated to provide customers with information on the free format message content that they should send. Changes have been highlighted.
Clearstream Banking1 informs its customers that it has put in place an operating model that will be applicable in case it has been notified by its common depository that an alternative method of payment, different from the one foreseen in the Terms & Conditions of the security, has been applied by a Russian issuer to a non RUB Eurobond issuance for its related payments (income, redemption).
Alternative methods of payment that may be made by Russia-related issuers in the context of sanctions regulations of the UN, U.S.A., EU and the UK and responsive regulations in the Russian Federation include but are not limited to direct payments as per the below definition:
Partial or full payments made by the issuers in RUB (that is, change of payment currency compared the original currency of the security) directly to certain holders and end investors in Russia. This may be accomplished by paying a regular income payment or final redemption for which the position is held with the clearing systems on an account of a holder in Russia directly, by a repurchase/acquisition of bonds held in the clearing system or an exchange of bonds held in the clearing system for Russian instruments (implying the cancellation of the purchased or exchanged amounts of the bonds).
In those scenarios, the remaining proceeds due (if any) might be paid by the issuer in the original currency of the security to the paying agent (appointed as per the Terms and Conditions of the security) through the standard channel for further payment to the ICSDs.
The Russian legislation in this regard affects all issuers and guarantors of Eurobonds, irrespective of whether they or their holders are individually targeted by any applicable sanctions, including but not limited to those of the European Union, the United Nations, the United States or the United Kingdom.
In the event that a customer knows or has a reason to know that a Russian issuer of bonds or an issuer with a Russian guarantor intends to credit or has credited the customer or a downstream holder with a payment ostensibly relating to interest or final redemption payment in respect of an amount of securities held at Clearstream Banking, on an account other than customer's account at Clearstream Banking, customers are required to notify Clearstream Banking of:
- The amount paid and in which currency
- The identity of the holders in respect of which the payment is to be received
- The date on which payment has been received
Clearstream Banking intends to avoid double payment in this scenario without, however, making any determination whatsoever about whether the payment outside Clearstream Banking represents any discharge of the issuer’s obligations to it or to holders. Clearstream Banking will not process repudiation instructions in respect of such payments and will not issue any markdown instruction in respect of such payments to its depository.
The impacted customers are requested to send to Clearstream a free format message with the following content:
Attention: Income team Luxembourg
We refer to security ISIN code and Name: […]
Event type: Coupon/Redemption
Payment date: […] [/ Intended payment date: […]]
Our account XXXXX (please indicate the account holding the position, including a sundry account should it be the case)
Our Holding: XXXXXXXX
We hereby inform you that a direct [partial/full] payment [has occurred on […]] in deviation from the terms of the security and the framework in place with the official paying agent. We further confirm that this payment has been received from […] in the amount of [currency + amount …] [please provide allocation by underlying beneficial owner] corresponding to the Income entitlement on a balance of XXXX. We further confirm that the latter balance was (will be) cancelled/ not cancelled by the Issuer.
We agree that Clearstream Banking S.A. shall not be held liable for any loss, claim, liability, expense or damage that we could suffer as a result of the non-payment of coupon/redemption amount on our account with Clearstream Banking S.A. We furthermore agree to indemnify Clearstream Banking S.A. against any loss, claim, liability, expense or damage that Clearstream Banking S.A. could suffer as a result of this non-payment.
This ad-hoc operating model foresees various checks and validation steps that may delay the payment of the remaining proceeds if any and if received through the paying agents to the securities holders in Clearstream Banking. While Clearstream Banking cannot guarantee the integrity of the said payment given the circumstances, it believes that the above checks and steps are necessary to preserve such integrity.
Clearstream Banking reminds customers of the requirement to comply and to ensure compliance by any of the customer’s underlying clients, with any applicable sanctions, including but not limited to those of the European Union, the United Nations, the United States or the United Kingdom.
For further information, customers may contact Clearstream Banking Client Services or their Relationship Officer.
1. Clearstream Banking refers collectively to Clearstream Banking S.A., registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Trade and Companies Register under number B-9248, and Clearstream Banking AG (for Clearstream Banking AG customers using Creation Accounts), registered office at 61, Mergenthalerallee, 65760 Eschborn, Germany, and registered in Register B of the Amtsgericht Frankfurt am Main, Germany, under number HRB 7500.