Russia's MDM Bank's restructuring amendment could trigger cross-acceleration

By Caroline Salls

Pittsburgh, May 23 - MDM Bank's plans to implement an amendment to a restructuring that would mitigate the risk of any early amortization event on the secured loan provided to the bank by MDM DPR Finance Co. SA could trigger a cross-acceleration of the bank's other debt, according to a Moody's Investors Service notice to noteholders.

The bank is seeking noteholder consent for the amendment, which it plans to implement within two months.

According to the release, MDM Bank backs the DPR notes issued by MDM DPR Finance.

Moody's said its initial rating was based in part on the structural and legal protection that the early amortization triggers were believed to provide, but it did not take into account any potential resulting cross-acceleration.

As a result, Moody's said it will review the proposals to determine whether the proposed amendment will mitigate the cross-acceleration issues.

The ratings agency said failure to mitigate the cross-acceleration may result in negative pressure on the ratings of the DPR notes.

MDM DPR is a special-purpose company for MDM Bank, which is a Moscow-based financial institution.

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