VEB.RF and the Russian Agricultural Bank Group have signed an assignment agreement in respect of Eurodon’s loans. The transaction totalled 6.2 billion roubles.
As Eurodon’s major creditor, VEB.RF gained control of the company in 2018 after its previous owners had found themselves unable to service their debts. In February 2019 the company came under financial monitoring as part of insolvency proceedings. VEB.RF took on Eurodon’s operational management and carried out the company’s financial restructuring, which enabled the company to carry on as a production facility, ensured the settlement of all its debts, wage arrears included, and eliminated phytosanitary hazards.
“As the principal owner of Eurodon, VEB.RF fulfilled its functions of a development institution: we saved the company as a production facility and resolved a host of phytosanitary issues. I think the agreement to assign such an important local business to Russian Agricultural Bank, which has all the necessary expertise to provide financing for agriculture, is a very good decision that will allow Eurodon to realise its potential,” VEB.RF’s First Deputy Chairman Mikhail Kuzovlev said.
“As a bank systemically important to Russian agribusiness, we believe that the company’s financial restructuring is our first priority. Russian Agricultural Bank is interested in enabling Eurodon to resume operation as soon as possible. A whole range of agricultural investors have shown an interest in the asset. We’ll be considering all proposals to take the optimal decision for the company and the agricultural sector in general,” Russian Agricultural Bank’s First Deputy Chairperson of the Board Irina Zhachkina said.
VEB.RF Provides RUB25.5bn Worth of Support for Projects Important to Russia’s Economy
From 25 March to 9 April 2020, VEB.RF disburses a total of 16.8 billion roubles on important projects. Its guarantees issued within that period exceeded 8.7 billion roubles. For the year to date, VEB.RF has allocated over 111 billion roubles to the Russian economy.
“These investments made by VEB.RF make it possible to continue carrying out Russia’s major industrial projects in the gas chemical sector, infrastructure, including the port infrastructure, the digital economy etc. Some projects use the Project Financing Factory mechanism. VEB.RF, therefore, works in partnership with commercial banks to attract an inflow of investment in the economy and continues to fulfil its obligations to partners and customers by providing financing on schedule, without delay. Our principal objective is a beneficial effect on the economy,” VEB.RF Chairman Igor Shuvalov said.
The projects funded by the development institution include as follows:
- Udokan construction and copper deposit development. The financing provided by the partner banks (VEB.RF, Gazprombank and Sberbank) was used by Baikal Mining Company to start large-scale work on building the related transport and power supply infrastructure and the processing facilities. The construction of the foundations of the main processing buildings is nearing completion; work is under way on the erection of metal structures for the future concentrator. The project is to create more than 2,000 jobs, excluding allied industries.
- Coal transshipment facility construction at the port of Vanino, Muchke Bay. The project involves building a high-technology coal terminal at the seaport of Vanino, Khabarovsk Territory. The annual cargo turnover of the terminal’s first phase is estimated at 12 million tonnes of coal. Phase I is scheduled for completion in 2020. The potential cargo turnover of the terminal totals 24 million tonnes of coal per year. The project is to create more than 600 jobs.
- Creation of Russia’s nationwide end-to-end track & trace system. The Chestny ZNAK system will make the consumer goods market transparent and ensure that genuine and high-quality goods will be sold. The technology effectively combats counterfeit goods and protects consumers and bona fide businesses.
- VEB.RF also paid a tranche for the project to build four energy-from-waste plants for municipal solid waste in the Moscow Region. Under the current turbulent conditions in the foreign exchange markets due to both the difficult global epidemiological situation and falling oil prices, the syndicate of banks, including VEB.RF, and the borrower decided to minimise currency risks at the investment stage of the project: funds were lent for conversion into foreign currency for subsequent payment for foreign long-lead equipment. This made it possible to prevent the project budget from being exceeded in the future as a result of further currency fluctuations.
- A tranche of the approved financing was paid to prepare design documents under the ethane-containing gas processing project at the settlement of Ust-Luga. The project initiators are Gazprom and RusGazDobycha.
- VEB.RF also provided financing for design documents under the project in the Tomtor rare-metal deposit, one of the largest in the world. Some of the financing will be used to do engineering work for equipment intended for the mining and processing facilities.
- The projects that received funding from VEB.RF include the construction of the Kazbek technology park in the Chechen Republic. The project involves setting up four interconnected production facilities for building materials (gas-concrete blocks and slabs, fibre-cement slabs, dry mortars, building lime).
VEB.RF Expert: ‘International Rules of Trade Finance Need to Be Adapted for New Economic Conditions’
With the participation of a VEB.RF expert, the Banking Commission of the International Chamber of Commerce (ICC) prepared and released a guidance paper on trade finance transactions subject to ICC rules for use at this difficult time. The economic pressures on coronavirus-affected banks are intense. The most important question is whether or not the force majeure provisions of ICC rules can be applied during the COVID-19 pandemic.
As specified in the paper, even where a trade finance transaction is made subject to ICC rules, depending on the applicable law it will require a court or tribunal with jurisdiction, or a government or regulatory authority to make a decision as to whether an event of force majeure is to be declared. The main recommendation made by ICC is that the parties to transactions should resolve any issues through negotiations for mutual benefit. The Commission also provided comments on how to deal with interruptions in the delivery of documents.
The principles laid down in the guidance paper can be applied not only to the uniform rules for documentary credits, guarantees, documentary collections and payments, but also to transactions that are not subject to the rules, for example lending.
VEB.RF is constantly involved with the Paris-based head office of the ICC Banking Commission, working to create the favourable conditions for international payments. ICC rules are indispensable for all kinds of trade finance. VEB.RF co-founded ICC Russia in 2000, serving the interests of the Russian business community.
VEB.RF is represented on the ICC Banking Commission by Alexander Zelenov, Senior Managing Director of Finance. He was a vice-chairman of the ICC Banking Commission for 12 years, was in charge of the Russian National Committee of the ICC Banking Commission for almost 20 years, and was a member of some of the Commission’s working bodies, including the working group that drafted the 2017 version of the Uniform Customs and Practice for Documentary Credits (UCP 600), which has governed the issuance and use of letters of credit for many years.
First Interest-Free Loans Given by SME Bank to Coronavirus-Affected Companies
SME Bank, a subsidiary of RSMB Corporation, has given the first interest-free loans to support coronavirus-affected small and medium-sized enterprises. Support was provided for three cargo carriers in the Krasnodar Territory and the Rostov Region and a freight business in the Perm Territory. The bank lent a total of 17.5 million roubles intended for salaries paid to 175 employees.
With support from SME Bank, the companies will be able to continue operations without interruption and pay stable salaries to their employees. The customers intend to adapt themselves to the new economic environment in the freight services market and maintain their current business.
As the bank’s existing customers, the companies received loans in record time, within one business day.
Russian Economic Development Minister Maxim Reshetnikov said: “Another programme we are launching this week is salary loans. The ultimate goal of our policy is to help businesses to retain and keep paying their employees. For this purpose, we’ve launched a rescue scheme: a business will be able to take out a zero-interest loan to pay a minimum wage to each employee. This will help out small and medium-sized enterprises across the industries affected during six months.”
As a reminder, SME Bank launched a new interest-free loan scheme on 1 April 2020 to help SMEs to meet the immediate needs related to supporting and retaining their employees, such as salary payments. The loan amount is calculated on the basis of the region-specific minimum wage and the number of staff members. The loan has a maturity of six months, a balloon payment and an interest rate of 0% p.a.
The new scheme is part of the Russian Government’s prompt measures to support small and medium-sized enterprises. The zero-interest loan has a limit of 5 billion roubles and is backed by a surety bond issued by VEB.RF to SME Bank. As previously noted by VEB.RF Chairman Igor Shuvalov, development institutions have all the necessary tools to react flexibly to the needs of the real economy and lend a helping hand to businesses and their employees.
VEB.RF Issues Surety Bonds Worth RUB10bn Each to Promsvyazbank and Otkritie Bank
Overall, VEB.RF has plans to issue surety bonds totalling 100 billion roubles to systemically important banks and SME Bank. The surety bonds are intended to secure the zero-interest loans given to small and medium-sized enterprises to finance their salary payments.
“As part of the Russian Government’s prompt measures to provide support for small businesses, VEB.RF issued surety bonds worth 10 billion each to Promsvyazbank and Otkritie Bank. The commercial banks are our reliable partners, and we have joined forces once again to support small enterprises. The surety bonds are intended to secure the zero-interest loans taken out by businesses for their salary payments. Overall, VEB.RF has plans to issue surety bonds totalling 100 billion roubles,” VEB.RF Chairman Igor Shuvalov said.
VEB.RF had previously issued surety bonds worth 20 billion roubles each to Sberbank and VTB to guarantee loans to small businesses.