Bonds “Peresvet” fell to a minimum after the disclosure of the terms of conversion

Quotations of bonds of Bank “Peresvet” on the Moscow stock exchange fell to historically low values Monday, February 20, after investors were announced restructuring terms of the securities. Their market value has decreased to 18-30% of the nominal value (depending on series), and the price of some bonds fell to 13-15% of the nominal value. Yield number of securities soared to 300-800%. On the eve of Friday, 17 February, the market saw transactions with bonds “Peresvet” at the price from 27 to 30% of the nominal value, the price of some of the issues maturing in 2017, was at the level of 45-48% of the nominal value.

On Monday, the Bank “Peresvet” has published a restructuring of its bonds, suggesting their holders to extend the maturity 2034-2036 years. Investors promised coupon income in the amount of 0,51% per annum and the payment of compensation in the amount of 0,25–0,51% of the face value of the bond depending on the issue. The offer applies to nine holders of rouble bonds “Peresvet”. According to the “KIT-Finance Broker”, now in circulation there are bonds in the amount of 29.6 billion rubles, period of repayment of the releases coming as early as 2017. Eight bonds have already been defaulted.

The holders of bonds “Peresvet” at the meeting will on 3 March. As a representative of the interests of the bond owners of the proposed company “Region” Finans, member of the group “Region”. The company declined to comment, citing the absence of a decision of the shareholders.

Earlier the Bank offered creditors to convert their liabilities into subordinated debt. The terms of restructuring proposed by the major creditors (among them the structure of “inter RAO UES”, “RusHydro”, chamber of Commerce and industry of the Russian Federation), much better than those which were announced to holders of the exchange bonds. Creditors the Bank is ready to return to 10-15% of the investment of “real money”, and the rest is converted to paper for 15 years at a rate of 0.51% per annum.

Analysts of “KIT Finance Broker” I believe it is unlikely that a General meeting of bondholders will accept the proposed conditions and representative of the holders of securities will work hard to protect their interests. “We recommend to get rid of the bonds of JSCB “Peresvet” at current market prices because current prices are significantly above the size of the compensation and the yield to maturity restructured securities under the terms offered are too low. To hope for a substantial renegotiation of the payoff is not worth it,” they say in my review.

“Any yield, which would suggest Peresvet holders of the bonds does not compensate for the risks on these securities, so investors are unlikely to agree to the proposed terms of restructuring,” — said the head of the debt Department of a major Bank. Especially since, according to him, the Bank had already defaulted on these securities. The banker believes that a significant portion of investors will try to sell bonds even at minimum price on the exchange.

Managing Director on Bank ratings RAEX Stanislav Volkov believes that despite the tough conditions, the bondholders “overexposure” may have to agree to a restructuring. “Otherwise, a high probability of revocation of the Bank, and in the event of its bankruptcy they risk losing all the investments,” he says.

According to the expert, among the creditors of the Bank “Peresvet” is located, the funds for deposits, and banks and financial groups that bought the bonds, there is a significant difference. “Last bought the bonds to get cheap financing from the Central Bank, or in order to optimize the costs of mandatory reserve on funds raised. Hence, a more rigid attitude to the holders of the bonds by the regulator, who thus wants to prevent any further use of such schemes,” — said Volkov.

In the Bank “Peresvet” from October last year, has a temporary administration, appointed in connection with the fact that he did not satisfy the requirements of creditors. In December 2016 one of the largest creditors of the Bank appealed to Prime Minister Dmitry Medvedev with the request to support the rehabilitation of the Bank. The turnaround can be belonging to structures “Rosneft” the all-Russian regional development Bank (RRDB). The lenders are counting on the support of the ASV. As stated in the Bank of Russia, the question of financial rehabilitation of the Bank the provision of financial assistance by the Deposit insurance Agency will be considered on the conversion results of the Bank’s creditors of their claims against the Bank in the Bank’s bonds. One of the conditions of reorganization — debt “Peresvet” should be converted to “would be” until April 14.