Presidential Decree No.665 dated September 9, 2023 (“Decree No.665”) was published recently and regulates the procedure which Russia will follow when performing its obligations under eurobonds (state bonds in foreign currency) to residents and to foreign creditors. The new decree modifies the procedure previously set by Presidential Decree No.394 dated June 22, 2022. In this overview, we will briefly analyze how Decree No.665 changed the process.

1. The Russian Ministry of Finance confirmed that payments to those who hold eurobonds through Russian depositories will be made in Russian rubles.
2. Until the end of 2023, there are three different payment procedures that will be applied successively to those who hold Russia’s eurobonds through foreign depositories, depending on the date of the payment accrual.

• If the accrual date is on or before September 15, 2023, the payment will be transferred in Russian rubles to a special I-type account (счет типа «И»). Main characteristics of the I-type account are as follows:
  • It is opened not in the name of the ultimate beneficiary of the bond, but in the name of the depositary;
  • It is a ruble account;
  • Foreign depositories are entitled to withdraw funds from I-type accounts outside the Russian Federation for making further payments to eurobond holders;
  • Monies on I-type accounts are subject to indexation on general terms. The only exclusion is the period from November 25, 2023 to December 14, 2023.[1].

By November 24, such payments must be made to the eurobond holders and Russian depositories for which I-type accounts have been opened earlier.

• If the accrual date is on or after September 16, 2023, but up to December 14, 2023, inclusive, the payment will be transferred in Russian rubles to the I-type account on the 91st day after the date for which the next payment is currently scheduled, given that the confirming documents are provided (the list of required documents and relevant state bodies is yet to be determined by the Russian Government and Ministry of Finance).

In such event, the monies are subject to indexation.[2]

The separate regulation is needed because payment under eurobonds XS0971721450 must be made on September 16, 2023 in the amount of USD 3 billion.

• If the payment is scheduled on or after December 15, 2023, the Russian National Settlement Depository will submit an order to a European depositary, such as Euroclear, to transfer the amount from the National Settlement Depositary’s account to the foreign depositary’s account, and the submission of such order will be deemed proper fulfillment of Russia’s obligations under eurobonds.[3]

This means that starting December 15, 2023, the mechanism established by Decree No.665 actually sets the stage for beginning the “exchange of frozen assets.” At the same time, the investors holding eurobonds through Russian depositories will be paid as described in the offering prospectus.

Further clarifications concerning the details of the new payment procedure should be given by the Russian Ministry of Finance and the Bank of Russia pursuant to the Decree.

Our team has experience in dealing with the receipt of payments under eurobonds, and we will be happy to assist you in assessing your particular situation. We will continue to monitor the developments and clarifications of the authorities.

This overview was prepared by Principal Associate of the Tax practice at Capital Legal Services Ekaterina Smolovaya, Associate Anastasia Lokotko, Paralegals Anna Metlyakhina and Margarita Skorodumova.

Additional information

Should any questions arise in connection with the above or if you need any additional materials, please contact the Capital Legal Services office in St. Petersburg or Moscow.

This information letter keeps clients of Capital Legal Services and other interested parties abreast of information that may, to some extent, affect their activity or cater to their interests. The opinions and commentaries expressed in this information letter shall not be deemed legal advice and do not cancel the need to obtain legal advice or legal opinion on separate issues.

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