Russian Standard lifts late consent fee in bid to amend 10¾% notes

By Susanna Moon

Chicago, Feb. 4 – Russian Standard Finance SA said it amended its consent solicitation for its $350 million outstanding 10¾% loan participation notes due 2018.

The late consent fee is now $50 per $1,000 principal amount, according to a company press release. Before the change, the consent fee would have been $10 per $1,000 principal amount for consents received after the early deadline.

As previously announced, Russian Standard began another bid to amend the 10¾% notes to try to make the notes count as tier 2 capital.

As of 11 a.m. ET on Feb. 3, the early consent date, holders of about 88.1% of the notes had voted in favor of the measure.

The notes were issued as series 11 notes under the $2.5 billion program for the issue of loan participation notes for the purpose of financing loans to Russian Standard Bank.

As announced Nov. 26, Russian Standard set a meeting for Dec. 18 in London to seek to improve the treatment for regulatory capital purposes of the notes.

The changes will make the debt fully compliant with the requirements for tier 2 capital recognition, the company previously said. As part of the changes, the interest rate will increase to 13%.

The proposals failed to pass at that meeting, however, and the issuer has begun another consent solicitation on the same terms.

A new meeting will be held Feb. 10 in London.

After consulting with the borrower, and based on subsequent discussions with some investors, the same proposals could pass if they were put to a new meeting of noteholders, according to a company press release.

Noteholders who would like to participate in the new meeting must submit new votes, the release noted.

The expiration of the consent solicitation is 11 a.m. ET on Feb. 6. The solicitation began Jan. 19. Holders must be of record as of 6 p.m. ET on Feb. 2.

The early consent fee is $50 per $1,000 principal amount of notes for which consent instructions were delivered by the early deadline.

Consent terms

The issuer is seeking to modify provisions of the loan agreement to improve the regulatory capital treatment of the loan by extending the maturity to April 10, 2020 and by including the principal write-down and interest cancellation provisions to make the loan fully compliant with the requirements for tier 2 capital recognition under Regulation 395-P, according to the press release.

Interest also would be amended to 13% from 10¾%.

The proposals will pass by a majority of at least 75% of the votes cast.

HSBC Bank plc (+44 207 992 6237, email to liability.management@hsbcib.com, attn: liability management group) is the solicitation agent. Lucid Issuer Services Ltd. (+44 20 7704 0880, email to rsb@lucid-is.com, fax +44 0 7067 9098, attn: Paul Kamminga/Victor Parzyjagla) is the tabulation agent.

The principal paying is Deutsche Bank AG, London Branch (fax +44 20 7547 0916, email to TSS_REPACK@list.db.com, attn: trust and agency services). The registrars are Deutsche Bank Luxembourg SA (fax +352 473 136, email to lux.registrar@db.com, attn: coupon paying department). Deutsche Bank Trust Company Americas (fax: 212 797-8614, attn: trust and securities services).

Original consent bid

Russian Standard began the original consent solicitation on Nov. 26, asking holders to approve the modification of the subordinated loan agreement dated Oct. 8, 2012.

The company also sought the addition of a clause that provides that if a write-down has occurred, any accrued interest on the subordinated loan will not be paid, according to a previous company notice.

No interest will accrue as long as a write-down is continuing.

Also, if a write-down has occurred, the company said its obligations under the subordinated loan agreement to repay the principal amount will be terminated in full or in part.

After the par amount has been written down, it may not be restored under any circumstances, even if the write-down is no longer continuing.

Noteholders will be deemed to irrevocably waive their right to receive and no longer have any rights against the issuer for repayment of the principal amount of the notes and accrued interest.

All references in the Regulation S global notes and the Rule 144A global notes to “10¾%” will be deleted.

Holders will be asked to amend

• Paragraph 8 of the issue terms to read April 10, 2020;

• Paragraph 9 of the issue terms to read (i) until but excluding the date of the amendment, 10¾% per year and, (ii) from and including, 13% per year fixed rate;

• Paragraph 14(i) of the issue terms to read (i) until but excluding the date of the amendment, 10¾% per year and, (ii) from and including, 13% per year, payable semiannually;

• Paragraph 14(iii) of the issue terms to read (i) until but excluding the date of the amendment, $53.75 per calculation amount and, from and including, $65.00 per calculation amount, in each case, subject to the application of any write-down measure under clause 8 of the loan agreement;

• Paragraph 16 of Part B of the issue terms to read (i) until but excluding the date of the amendment, 10¾% per year and, (ii) from and including, 13% per year. The yield is calculated at the issue date on the basis of the issue price. It is not an indication of future yield, the press release noted.

In order to form a quorum there must be holders representing at least two-thirds of the outstanding notes. In order for the measure to pass, the company must obtain a majority of at least 75% of the votes cast.

Russian Standard is a Moscow-based lender.

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