Commercial (FTO) Debt

Soviet-era commercial (FTO) debt incorporates obligations assumed by Soviet companies and organizations to foreign banks and firms and includes contracts with payment deferrals, short-term and mid-term commercial credits confirmed by drafts or bills, drafts and bills with sight payments, revocable and irrevocable letters of credit including letters of credit with payment deferrals, collections and other commercial liabilities.

On October 01, 1994, in the Statement on Exchanging Soviet-Era Commercial Debt to Foreign Creditors the Government of the Russian Federation declared its readiness to assume legal responsibility for Soviet-era commercial debt. The Statement contains a list of obligations, which are taken to mean “Soviet-era commercial debt”. This Statement provides for settling this debt on the terms similar to those in the agreements on restructuring official debt (to the Paris Club) and interbank debt (to the London Club).

On December 18, 1996, at the Forum of Trade Creditors in London with various nations’ leading clubs including certain suppliers, basic terms of exchanging commercial (FTO) debt for euro bonds of the Russian Federation with final maturity dates in 2010 and 2030 were agreed upon. These terms are basically similar to those of the London Club.

As a result of the first (2002) and the second (2006) exchanges of Soviet-era commercial (FTO) debt obligations for Russian eurobonds with final maturity dates in 2010 and 2030 more than 10 000 creditors’ claims on the principal were settled for the amount of 2.6 billion US dollars including on «2010» eurobonds worth 0.3 billion US dollars and on «2030» eurobonds worth 2.1 billion US dollars.

On November 27, 2009, the Finance Ministry of the Russian Federation announced the start of the third (final) stage of exchanging reconciled and accepted for settlement claims for Soviet-era commercial (FTO) debt for eurobonds of the Russian Federation with final maturity dates in 2010 and 2030.

The Final Proposal for Exchange provided for terms of restructuring that are almost similar to those applied for the two abovementioned previous stages of settling the said debt.

The total amount of debt claims accepted for exchange within the third stage was equivalent to 405.8 million dollars. The total number of these claims exceeded 1,900; their holders were the residents from 24 foreign countries.

The exchange procedure was completed on December 22, 2009.

In exchange for their claims creditors received eurobonds with final maturity dates in 2010 and 2030, with outstanding principal amount being 5.1 million US dollars and 307.5 million US dollars respectively; they also received monetary funds for the total amounts of 262.9 million US dollars.

Thus, after the completion of the third stage of exchanging Soviet-era commercial (FTO) debt, one of the most complicated and large categories of the government foreign debt of the Russian Federation inherited from the former USSR has been fully settled.