The High Court of Ireland has ordered the liquidation of two of GTLK’s Irish subsidiaries, GTLK Europe DAC and GTLK Europe Capital DAC, after creditors said the companies were unable to “pay back a net deficit of nearly $1.6 billion,” Reuters writes.
It is clarified that the main business of the companies is the leasing of aircraft. In 2022, the companies of the STLC group fell under the sanctions of the UK, the US and the EU, which led to the inability to make payments on Eurobonds.
The High Court of Ireland was supposed to consider the application for the liquidation of the companies on May 29, but on May 26, the “daughters” applied for the appointment of an expert after the decision of the Russian government to write off debts in the amount of $1.5 billion, wrote Bloomberg. The examination procedure is intended for companies that have the potential to survive and recover.
As a result, the High Court decided to reject the request for an expert examination. According to Judge Conor Digman, “the applicant acted in bad faith”. Among the shortcomings on which companies could be denied this procedure, he cited the lack of “reasonable chances of survival for firms as a going concern”, since “the possible emergence of certain assets in the future” cannot be equated with the potential viability of companies.
According to Reuters, the company’s debt to Eurobond holders is about $3.75 billion. In connection with the decision of the High Court to liquidate GTLK Europe DAC and GTLK Europe Capital DAC, Moscow Exchange announced the day before, June 1, that trading in bonds with a maturity of repayments in 2024–2028 Vedomosti sent a request to the STLC.
Both companies are issuers of STLC Eurobonds, recalled Alexei Bulgakov, head of debt market analytics at Renaissance Capital. According to him, the Russian PJSC STLC is the guarantor for all issues of STLC Eurobonds. On May 31, the company reported that STLC had already requested from the National Settlement Depository (NSD) the lists of holders of Eurobonds of the GTLK-24 issue as of May 30, when the coupon payment cut-off date was.
Bulgakov also recalled that Petropavlovsk Plc had already gone through the liquidation procedure. – Issuer of Eurobonds Petropavlovsk, but he was not under the influence of Western blocking sanctions. On July 12, 2022, UK-registered Petropavlovsk announced that it had filed an application with the High Court of London for external administration due to the fact that the company is insolvent under UK insolvency law. In addition, the company has also applied for the withdrawal of its ordinary shares and bonds maturing in 2024 from trading on the London Stock Exchange (LSE).
Under EU law, sanctions against a parent company also apply to its subsidiaries. This led to the fact that GTLK Europe DAC and GTLK Europe Capital DAC were actually “immobilized” – they needed to obtain a special license for each operation, Sergey Glandin, partner at NSP law firm, explained. For this reason, the liquidation of companies was a matter of time, he said. As a result of the decision taken by the court, a liquidator will be appointed in the company instead of the management, who is not controlled by the shareholders of the companies. STLC has the opportunity to appeal the decision, Glandin said.
According to the Cbonds service, there are six issues of Eurobonds of the STLC group of companies worth $3.25 billion in circulation. Payments on them have not been made since February 2022, said Ilya Khersontsev, a member of the Board of the Association of Bondholders (ABO). The issuer of all six issues is GTLK Europe Capital DAC, and GTLK Europe DAC and STLC are guarantors, that is, they are obliged to be fully or partially responsible for the fulfillment of obligations of the bond issuer.
The decision of the Irish court will not affect the bonds issued in the Russian infrastructure, Khersontsev explained. STLC is still obliged to pay for them, he stressed. In turn, the Russian holders of the company’s Eurobonds may demand payments through the courts, since STLC is the guarantor for these issues.
Part of the proceeds from the liquidation of GTLK Europe DAC and GTLK Europe Capital DAC will go to the account of the Russian National Settlement Depository (NSD) in the Belgian depository Euroclear, Khersontsev added. Their transfer to the accounts of bondholders with NSD will be impossible due to sanctions, but formally they will be considered paid. STLC will service its Eurobonds and associated guarantees only within the Russian perimeter, Khersontsev predicts.