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Source: Central Bank of the Russian Federation in English

30 December 2020

Market players support the soft regulation of legal relations emerging between bond issuers and holders in the process of liabilities restructuring. This conclusion is based on the outcomes of the discussion of the consultation paper on conceptual approaches to regulating the protection of bondholders’ rights.

Respondents firmly believe that ensuring different debt repayment conditions for different categories of securities holders is a pressing issue. According to the current Russian legislation, issuers are not obliged to ensure equal and fair conditions for all creditors amid economic hardships forcing companies to conduct restructuring in order to recover their solvency. As a result, return on bonds may be considerably lower than that of other borrowers of the same issuer. However, respondents believe it unreasonable to introduce strict limitations for companies undergoing the restructuring procedure.
At the same time, a reduction of the number of persons with voting powers at the general meeting of bondholders considering the issue of debt repayments may help avoid unfair decisions. Specifically, it is proposed not to count the votes of large bondholders who are simultaneously creditors under other obligations of the same issuer, or who have open short positions on the issuer’s shares anticipating their value reduction. In the opinion of the market community, such creditors may accept knowingly unfavourable conditions on bonds along with gaining beneficial positions on other loans or selling shares with profit.
Moreover, the list of information provided to bondholders before their general meetings is proposed to contain a detailed restructuring plan and an independent person’s opinion on restructuring conditions (if available).
Discussion participants also proposed to envisage a possibility for bondholders to conduct their general meetings online.


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