Moscow Exchange eyes first ‘replacement bonds’ in September

MOSCOW: Moscow Exchange, Russia’s largest bourse, said it expected next month to bring the first issues of so-called “replacement bonds” that Russian companies need to replace unserviceable Eurobonds.

President Vladimir Putin signed a law in July that gives companies until the end of 2022 to issue bonds in a simplified procedure on the local market.

“We hope that the first issues of replacement bonds will appear at the end of September, as there is not much time left before the end of the year,” said Ekaterina Nagaeva, director of the bourse’s listing department, in comments cleared for publication on Monday.

Proposed by the central bank, the “replacement bonds” would be a substitute for Eurobonds that Russian companies can no longer service due to sanctions connected to Moscow’s actions in Ukraine.

Nagaeva said the parameters of a replacement bond issue must be the same as those of the Eurobonds they are replacing in terms of maturity, yield, coupon schedule and face value.

The bonds can be issued in roubles or in foreign currencies. One term of the law allows for the lender to demand repayment in roubles, rather than the currency of the bond’s issue.

“Other parameters - surety, covenants, early repayment – may differ depending on the circumstances,” Nagaeva added. “Keeping them or adjusting them is left to the discretion of the issuer and investor.

“Investors should therefore pay attention to the parameters and structure of the replacement bond offered to them.”

Moscow Exchange is seeking to gradually return some sense of normalcy to Russian financial markets after severe disruptions in February and March as Western sanctions over Russia’s actions in Ukraine began to bite.

The bourse plans to lengthen currency and stock trading hours and welcome back foreign investors from “friendly” jurisdictions - those that have not imposed sanctions – to derivatives trading.

Nagaeva said the exchange is recommending issuers regularly disclose financial statements. The central bank has told Russian banks they should not publish certain financial statements, seeking to limit risks to credit agencies associated with the imposition of Western sanctions.

“The complete absence of information disclosed by issuers reduces transparency on the market, heightens investors’ risks and lowers confidence in the market,” Nagaeva said.