Reorg on the Record: Russian sanctions continue: license to restructure?
Thu Sep 1, 2022 8:39 am

Written by Shan Qureshi, Head of Legal Restructuring Innovation and Initiatives || The sanctions imposed on Russia by the U.K., U.S. and EU authorities since its invasion of Ukraine in February are the most far-reaching seen in modern times. Their effect on the loan and bond market has been extensive, creating further complexity for both lenders and borrowers in dealing with their sanctioned counterparties.

An English Court last week provided useful guidance as to how companies can legally deal with sanctioned creditors when restructuring their debt. Nostrum’s scheme of arrangement used a bare trust structure to hold consideration due to sanctioned creditors, and obtained a license from OFAC to send notice to its scheme creditors in order to hold its creditors’ meeting.

Elsewhere, cinema chain Vue is hoping to avoid the same fate as Cineworld which seems headed for bankruptcy in the U.S. Vue is currently attempting a large deleveraging exercise, equitizing a significant part of its senior debt in the hope it can return to profitability. With cinema attendance slowly recovering to about 70% of its pre-Covid average, boosted by James Bond’s “No Time to Die” in 2021, investors remain hopeful that the industry will live another day.
Shan Qureshi

Our European editorial teams are delivering the most in-depth data, analysis and reporting on thousands of credits that are either performing, stressed, distressed, going through restructuring or post-reorg. Check out these recent articles.

Nostrum Oil & Gas
The flexibility and pragmatic approach of judges in the English High Court with respect to schemes of arrangement has allowed Kazakhstan-focused Nostrum Oil & Gas to achieve the sanction of its scheme. The scheme is notable as over 7% of scheme creditors were disqualified persons under sanctions related to the war in Ukraine. Nostrum found itself restricted as to how it could deal with those disqualified persons and had to apply for licenses from the relevant authorities in the U.S., U.K., and the EU, to proceed with its comprehensive financial restructuring. » Continue Reading

Vue Cinema
U.K. cinema chain operator Vue is currently pursuing separate processes to allow it to incur £75 million in additional super senior facility; wipe out £165 million of second lien debt; and equitize £225 million of senior debt. On top of this, the group is attempting to manage a €130 million unsecured arbitration liability. Vue was hit heavily by Covid-19-related restrictions and LTM EBITDA at the end of August 2021 was negative but performance is improving with films such as “No Time to Die” and “Spiderman” driving up attendance. In the second half of 2021, Vue said attendance was at about 70% of pre-Covid average (over a three-year time period). » Continue Reading

Metro Bank plc
Some financial advisors are monitoring the U.K.-based high street lender Metro Bank, which ran into regulatory troubles recently, raising concerns about its financial health in an economic downturn, sources told Reorg. The bank has been reporting annual losses since 2019. Metro Bank’s £250 million 5.5% Tier 2 2028 notes have dropped from mid-60s at the beginning of the year to high 50s on Aug. 25 and its £350 million 9.5% 2025 MREL senior non-preferred notes dropped around 10 points from the low 90s at the start of the year to the low 80s. The lender earned bad press in recent months over an accounting blunder, which caused finance chief David Arden to step down in February. » Continue Reading

EMEA Mid Market Deal Pipeline
Funds are seeing some opportunities in the public-to-private space as some credits are seeking buyouts from sponsors to back future growth. Spanish cloud and cybersecurity company Gigas Hosting is working with Evercore as it plans to be taken private. Direct lenders have received due diligence materials for the sale of U.K. IT services group Acora, which is being marketed off £10 million EBITDA with DC Advisory running the auction. U.K. accounting firm Azets has attracted interest from some large funds keen to provide a unitranche leveraged at about 5x and a PIK. The company has upcoming maturities in November 2023. The sale of U.K. accreditation company CHAS is also attracting direct lenders. » Continue Reading

The company which has major fertilizer operations in Russia, is yet to release its first-half earnings as investors wait to see how the company copes with Western sanctions on its founder. The company recently removed the 2021 financial calendar from its website, which showed that EuroChem management released 2021 first-half financials on Aug. 18 of that year. The Zug, Switzerland-based company is formally owned by Aleksandra Melnichenko, the wife of EU-sanctioned Russian billionaire industrialist Andrey Melnichenko, who ceded control to her in March. » Continue Reading

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