One of Russia’s largest internet firms is facing the prospect of defaulting on its debt if it cannot agree a resolution with its bondholders.
VK Company, known as Mail.ru until October last year, has seen its London-listed shares suspended since March 3 and warned today that if trading does not resume on Wednesday (16 March), it will trigger a possible default on its $400 million convertible bond, which was due to be repaid in 2025.
The convertible bond — a type of loan that can be swapped for shares at specified points — may have to be paid back, alongside any accrued interest, towards the end of May this year as bondholders are entitled to ask for their money back early due to the share suspension.
VK has roughly $190 million in cash and cash equivalents, but about $80 million is held in foreign currency outside Russia.
New restrictions surrounding Russian money transfers, part of the growing number of global sanctions against the country over its invasion of Ukraine, mean VK will struggle to access overseas funds.
“It is possible [the company] will not have sufficient liquidity to fund the payments required for the redemption if most of the bondholders choose to exercise their redemption rights,” VK said.
The terms and conditions of the bond mean that if VK’s shares are suspended for a period of 10 consecutive dealing days or more, it is required to offer bondholders money back after both a de-listing period of 60 days and a further 14-day notice period.
VK said it will “continue acting in good faith” and hopes to enter negotiations with bondholders “to find a suitable solution”.
Without a resolution, “an event of default under the terms and conditions of the bonds would occur”, it said.
The warning comes amid growing fears that Russia will default on national debt payments due on Wednesday after foreign currency reserves were frozen overseas. The Kremlin has promised to meet the scheduled payment but said it would come in roubles, which may yet see it declared a default. Evening Standard