Russia: Replacement bonds
Further to the Presidential Decree No. 430 as amended, and the Federal Law No 292-FZ issued by the Russian Federation, Clearstream Banking would like to inform clients of the following impacts on the usual course of business with the Eurobond notes deposited either in the international market, U.S. or the Swiss domestic markets.
Please also refer to Announcement A23066.
As a reminder, such legislation enables and requires Russian obligors (Russian legal entities having obligations related to Eurobonds) to exchange their outstanding corporate Eurobond obligations held through Russian custodian banks by issuing new Russian domestic securities. The terms of the replacement bonds in principle correspond and are similar in all aspects to Eurobonds (such as payment dates, maturity and nominal value, denomination currency to Eurobonds). The replacement obligation refers to all Eurobonds regardless of their maturity. There are, however, possible situations which enable the Eurobond issuers to apply for a licence which would allow derogation from the compliance of the Presidential Decree No. 430 as amended (exact conditions are described in the decision of the subcommittee of Government Commission for Control over Foreign Investments from 24 July 2023 No. 176/3).
The Eurobond replacement process has been taking place outside of the clearing systems. As a result, the (I)CSDs are not included in the informational exchange with the Russian issuers. Clearstream Banking has no exact knowledge of which security issues are subject to the exchange (nor which have received government permission not to exchange) and has no visibility on these processes. Clearstream Banking is exclusively dependent on the information received externally.
Therefore, to identify the exchanged Eurobonds, all clients holding such securities are under continuous obligation to check with their underlying holders (if the information is not available to clients) and inform Clearstream Banking without any delay of any repurchases and/or exchanges that have occurred throughout the lifetime of the security. For this reason, Clearstream Banking has announced ad hoc corporate actions events that have been set up for the sole purpose of informing which security and which positions has been impacted under the Eurobond replacement procedure described above. The events have been announced on securities for which Clearstream believes have a connection to Russia and which may be impacted. It does not necessarily mean that the security has been/will be subject to the exchange. Should there be a security on which there is no event currently announced while the security may be subject to the mandatory exchange, clients fall under the same reporting obligation irrespective of the event announcement. In addition to a response under the announced event, clients are still under obligation to provide an MT599 for the purpose of income payments as requested in Announcement A22152.
Clients holding and engaging in transactions involving Russia-related Eurobonds must be aware and bear all the risks of holding such securities, including not receiving full (or any) entitlement in relation to their position due to debt replacement process described above, but also due to eventual payments made outside of clearing systems directly to certain holders and end investors or persons claiming to be holders and end investors. Even though these are external factors on which Clearstream Banking has no influence nor visibility, Clearstream Banking will continue to apply controls, multiple checks, and validation steps to preserve the integrity of payments if and when received.
Clearstream Banking reminds clients to comply, and ensure compliance at all times by any of clients’ underlying holders, with any applicable sanctions, including but not limited to those of the European Union, the United Nations, the United States, or the United Kingdom.
Further information
A list of impacted securities is attached below.
For further information, customers may contact Clearstream Banking Client Services or their Relationship Officer.
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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.