VEON launches scheme for eight-month extension on notes for sanctions

By Mary-Katherine Stinson

Lexington, Ky., Nov. 28 – VEON Ltd. and VEON Holdings BV launched a scheme of arrangement in England on Nov. 24 via the issuance of a practice statement letter to extend the maturity of its 5.95% notes due February 2023 and its 7¼% notes due April 2023 issued by VEON Holdings, according to a company press release.

The scheme proposes an eight-month extension to the maturity dates of the notes to October 2023 and December 2023, respectively, and amendments to the note terms and related trust deeds.

The extensions give VEON time to pursue a number of strategic transaction in response to an “evolving political situation.”

This includes time to conclude the sale of Russian subsidiary PJSC VimpelCom, expected to close in early June 2023 for an approximate $2.1 billion equivalent.

The proceeds from the sale will be used to discharge certain notes and will significantly deleverage VEON’s balance sheet.

It will also provide access to the company to the international debt capital markets, which are not currently available to the group.

Proposals

The proposed changes to the note terms are as follows: to amend the consent and quorum thresholds for ordinary matters and reserved matters as defined in the 2023 notes’ trust deeds and to exclude beneficial owners of the 2023 notes who are prohibited from dealing with the notes due to being sanctioned from counting in the consent and quorum thresholds; and to add an amendment fee of 75 basis points payable on the 2023 notes outstanding on their amended maturity dates.

The scheme is expected to allow for the implementation of the amendments upon obtaining the necessary majority consents of at least 75% by value of those beneficial owners of the 2023 notes present and voting either in person or by proxy at the scheme meeting. Any sanctioned beneficial owners or acting custodians will be excluded from participating in and voting on the scheme.

The scheme includes a standstill provision which stalls enforcement action if the company decides to pursue sanction licenses which have not been granted by the time the scheme is sanctioned. Under the standstill provision, the principal amount of the notes will be treated as if it has not fallen due for payment until the earlier of the date on which the amendments are implemented, Oct. 13, 2023 or the termination date of the scheme.

If the scheme becomes effective, all of scheme creditors will be bound by the terms of the scheme and the rights of the scheme creditors will be altered. However, completion of the amendments will be conditional upon obtaining licenses from competent sanctions authorities.

Meeting logistics

There will be a convening meeting on Dec. 20 with the issuance of an explanatory statement and accompanying documents and, subject to receipt of any necessary licenses and approvals, an invitation to submit voting and proxy forms, and a notice of scheme meeting announced on or shortly after Dec. 20.

The scheme meeting will be held on or after Jan. 24.

The sanction hearing, filing of sanction order and implementation of the amendments is expected on or after Jan. 30.

Background

The amendment actions follow six months of discussion in which the group and its advisors discussed the consequences for the group of Russia’s invasion of Ukraine and developments since February 2022 of the subsequent sanctions laws and regulations.

There has also been a withdrawal of VEON’s credit ratings by rating agencies due to VEON’s current exposure to Russia.

The group stated that it had determined that the blocking of payments through the international clearing systems affects a significant proportion of noteholders as they hold notes through the Russian National Settlement Depository, estimated to represent about 60% of the 2023 notes and about 50% of all notes maturing through 2027.

The group stated in the press release that it believes the short-term extension is the best option as it will provide time for the group to pursue strategic transactions, including the completion of the sale of Russian subsidiary PJSC VimpelCom.

Any beneficial owners who wish to discuss the scheme or amendments and who are not sanctioned are invited to contact VEON (bonds@veon.com) and/or Moelis & Co., who are acting as financial advisers (Marcel.Brouwer@moelis.com).

Further details regarding the scheme and the amendments are contained in the practice statement letter, available to scheme creditors at https://deals.is.kroll.com/veon.

Amsterdam-based VEON Ltd. provides mobile and fixed-line telecommunications services through its subsidiaries in emerging markets.

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