Russian Federation Reopens $1.25 Billion in Bonds

September 27, 2016

Cleary Gottlieb acted as counsel to the Ministry of Finance of the Russian Federation, acting on behalf of the Russian Federation, in connection with the $1.25 billion reopening of its May issuance of 4.75 percent bonds due 2026.

The bonds were sold to institutional investors in a Rule 144A/Regulation S placement. VTB Capital acted as sole lead manager. Pricing took place on September 22, 2016, and closing was on September 27, 2016. The bonds are listed on the Irish Stock Exchange.

The transaction brings the Russian Federation’s total external borrowing for 2016 to $3 billion, the maximum amount of external borrowing permitted under Russia’s 2016 budget. As with the original issuance in May, this transaction was structured to ensure that investors could subscribe for the bonds without violating any applicable sanctions. The prospectus stated that the proceeds of the bond issuance would be paid into the Russian Federal Treasury Account (used for foreign expenses) or sold to the Russian Central Bank and held as part of the Russian Federation’s international reserves, and would not be directed to any activity that would be prohibited for a U.S. or EU person or entity under sanctions laws, directives or regulations applicable to them.

The bonds were issued through the Russian clearing system, the National Settlement Depository (NSD), using the innovative structure created by Cleary for the May issuance, allowing NSD to clear bonds issued under English law in the form of global bonds. In advance of closing, Euroclear confirmed the eligibility of the bonds for clearing (in line with its decision taken in July 2016 to clear the original bonds), and as a result, settlement for the bonds took place through the facilities of NSD and Euroclear.