LAWFUEL – The Law News Network – Linklaters has advised SINEK (the Russian Republic of Tatarstan’s investment holding company) in raising US$250 million through a 10 year fixed rate guaranteed loan participation note (LPN) transaction.
Edel Capital, a Luxembourg SPV, issued the limited recourse US$ LPNs to fund a rouble loan to SINEK Capital S.A. (the Luxembourg wholly-owned subsidiary of SINEK) with the funds intended, amongst other things, for the development of a residential mortgage market in Tatarstan.
The transaction was structured to permit the Republic of Tatarstan to issue a guarantee covering the rouble loan which ultimately supports the US$ payments under the LPNs. Generally the Republic (as with the majority of other “Subjects”, i.e. member-states of the Russian Federation) is not permitted under the Russian Budget Code to incur foreign currency debt. Therefore, a structure was devised where the Republic issues a RUR guarantee in relation to a RUR loan which is funded by the issue proceeds converted into RURs and the repayments of which in roubles fund the US$ payments to the investors. SINEK also guaranteed its subsidiary’s payment obligations under the rouble loan.
The LPNs were amongst the first to be listed on the Irish Stock Exchange under the wholesale regime, using a Prospectus Directive (“PD”) – compliant Prospectus. The deal became public on 3 August 2005.
Phil Charlton, capital markets partner, Linklaters, commented :
“This was a challenging deal which involved extensive structuring work in the budgetary, foreign exchange and taxation areas. Given the budgetary limitations on the Republic incurring foreign currency debt, a rouble loan covered by the Republic’s guarantee became a central feature which required the support of some novel currency conversion facility arrangements which would permit the orderly exchange of roubles into US$ for the purposes of payments to investors and to assist the assessment of rouble liabilities under the guarantees. This deal reflects a further advance in the complexity and sophistication of Russian capital markets instruments.”
The cross-border team from Linklaters was led by Phil Charlton and included Jasper Evans, Joanne Conley, Thomas Levin and Lucy Morris (London), Dominic Sanders, Pavel Koutovoi and Victor Matchekhin (Moscow) and Nicki Kayser, Janine Biver and Stéphane Braun (Luxembourg).