Vedomosti is reporting that #O1Properties has commenced negotiations with holders of its USD 350 mln Eurobond issue regarding a potential change of controlling shareholder, who is currently of Boris #Mints. A London meeting is anticipated this week.

The September 2021 maturing Eurobond with an 8.25% coupon was issued by O1 Properties Finance Plc in 2016. It has fallen 17 points to 63.6 cents on the dollar, with yields surging 25% since April 2018, according to the latest Reuters data. The Eurobond prospectus contains a ‘change of control’  (CoC) clause that allows holders to demand immediate repayment of the Eurobond at 101% of par value plus any accrued interest. O1 Properties acts as guarantor which means it has to abide by all the Eurobond terms.

The CoC clause is included in the majority of secured corporate funding facilities, according to S&P. This means that O1 would have to repay the bulk of it debt if control over the company changed. As of 31 December 2017, O1 Properties had secured debt worth USD $2.133 bn with unsecured debt of USD $930 mln.  S&P analyst Anton Geizi has noted that “the company did not  have sufficient liquidity to redeem, all these liabilities”.

O1 Properties may be acquired by Cyprus-domiciled Riverstretch Trading & Investments. This company has been hired by Rossium of Roman Avdeev to work out a restructuring plan for the RUB 25 bn loan facility extended to O1 by the Credit Bank of Moscow (CBOM), according to Vedomosti. This loan is secured by a 62.5% stake in O1 Properties, according to Moody’s, and CBOM has transferred the loan, together with collateral, to Rossium. The next sizeable payment on this facility is scheduled for June 2018. If the O1 Group does not meet its loan payment, it could lose control of O1 Properties.

It is up to the Eurobond holders to trigger the CoC clause, and demand early repayment. They may choose instead to waive their right in exchange for an extra fee from the issuer. In this case, the Eurobond prospectus would need to be amended, which would require approval by 75% of holders.

“Investors should exercise their option and trigger the CoC clause unless they get enough clarity on who the new shareholder is”,  an investment banking analysts told  Molva. “The whole story looks dodgy and it is not clear what Rossium is up to. The risks of staying in the bond are high if the O1 changes hands”.

How the fortunes of O1 have unfolded

August 2017. The CBR nationalises FC Otkritie

November 2017. FC Otkritie sues O1 group companies for attempting to replace loans worth RUB 30bn extended to O1, with bonds. The Moscow court arrests shares of ‘O1 Properties Limited’, the parent company of O1 Properties.

March 2018. O1 Group announces that Mints is selling his stake in O1 Properties to Laysa Group. This transaction has never taken place.

CBOM sold its RUB 25 bn loan to O1 Group to Rossium. This loan is secured by a 62.5% stake in O1 Properties and 75% +1 share in Financial group “Buduschee”.  Rossium has hired Riverstretch Trading & Investments to work out a restructuring of the loan.

May 2018. “O1 Group Finance” defaults on RUB 14 bn, with FC Otkritie holding 75% of the issue.

Mints moves his family to London.

Russian investigators look into the transactions between O1 Group and FC Otkritie prior to the nationalisation of Otkritie.

June 2018. Three out of five of O1 Group’s local bond issues are in default, leaving RUB 87 bn of local bond debt outstanding.