VEON announces launch of scheme of arrangement to extend 2023 Notes maturities

24 Nov 2022

VEON announces launch of scheme of arrangement to extend 2023 Notes maturities Amsterdam, Netherlands, 24 November 2022 13:30 - VEON Ltd. (Nasdaq: VEON, Euronext Amsterdam: VEON) ( VEON or, together with its subsidiaries, the Group ) and VEON Holdings B.V. (the Company ), a global digital operator that provides converged connectivity and online services, today announced the launch of a scheme of arrangement in England (the Scheme ) via the issuance of a Practice Statement Letter to extend the maturity of the 5.95% notes due February 2023 and 7.25% notes due April 2023 issued by the Company (together, the 2023 Notes ) by eight months from their respective maturity dates.

Rationale for the Amendments

The Scheme launched by the Company today proposes an eight-month extension to the respective maturity dates of the 2023 Notes, together with certain other amendments to the terms of the 2023 Notes and related trust deeds as further outlined in this announcement.

The Scheme represents the culmination of six months of discussions between the Group and its advisers during which they have considered multiple different potential transaction structures. If the status quo were to continue, the options available to it would be significantly constrained by the current and evolving political situation, international sanctions laws and Russian regulations. In these circumstances, the Group has concluded that a short-term extension of the maturity of the 2023 Notes represents the best option available to the Group and its stakeholders, as it will provide the Group with additional time to pursue a number of strategic transactions.

The Amendments will allow the Group time to conclude the agreed sale of its Russian subsidiary, PJSC VimpelCom ( VimpelCom ), as announced separately earlier today (see here) (the VimpelCom Disposal ), which is expected to be completed in early June 2023 (subject to receipt of required regulatory approvals, any required consent from VEON creditors and satisfaction of customary closing conditions). Under the sale agreement for the VimpelCom Disposal, VEON will receive total consideration of RUB 130 billion (approximately USD 2.1 billion[1]). Subject to receipt of the necessary licenses and/or approval from competent sanctions authorities, it is expected that the total consideration will be paid primarily by VimpelCom taking on and discharging certain notes issued by the Company, thus significantly deleveraging VEON's consolidated balance sheet. The Group considers that the VimpelCom Disposal represents the single-most material deleveraging action available to the Group, which will at the same time increase the prospect of future access to international debt capital markets, which are currently not available to the Group.

The Amendments, together with the deleveraging described above, are also expected to curtail the inefficient use of cash which would result from the payments on the Russian National Settlement Depository (the NSD ) held portion of the 2023 Notes being trapped in the international clearing systems and the principal amount of the 2023 Notes held through Russian depositaries being repaid by both the Company and VimpelCom due to the European Union's sanctions targeting the NSD, and possibly in response to United States and United Kingdom sanctions laws and regulations targeting Russia more broadly, as further described below. It will also provide short term stability and further optionality to implement the asset monetization strategy underpinning VEON's objectives to further reduce leverage and maximize its stakeholders' returns.

The Scheme launched by the Company today proposes the following changes with respect to the 2023 Notes (together, the Amendments ):

an eight-month extension of the respective maturity dates of the February 2023 Notes and April 2023 Notes to October 2023 and December 2023 respectively;

an amendment of the consent and quorum thresholds for ordinary matters and Reserved Matters (as defined in the 2023 Notes trust deeds)[2] and excluding beneficial owners of the 2023 Notes who are the target of applicable sanctions laws or regulations that prohibit them from dealing with the 2023 Notes from counting in the consent and quorum thresholds[3]; and

payment of an amendment fee of 75bps payable on the 2023 Notes outstanding on their respective amended maturity dates.

Subject to the Amendments being successfully implemented, and completion of the VimpelCom Disposal, the Group currently intends to use excess liquidity to redeem financial liabilities to deleverage and reduce its interest obligations.

Background

Over the past nine months, the Group has successfully strengthened its liquidity position, and this will remain a key priority in the near term. However, despite the resilient performance of its underlying operating companies, which are considered largely self-sustaining, VEON's ability to upstream cash for debt service is currently impaired by currency and capital controls in two of its major markets (Ukraine and Russia) and other geopolitical/FX pressures affecting emerging markets generally, including the countries in which the Group has operations.

In addition, the conflict between Russia and Ukraine and developments since February 2022 with respect to sanctions laws and regulations have resulted in unprecedented challenges for VEON, limiting access to the international debt capital markets in which VEON has traditionally refinanced maturing debt and so hampering its ability to refinance indebtedness. Without a change in the status quo, the situation is likely to remain challenging, including as a result of the withdrawal of VEON's credit ratings by rating agencies due to VEON's current exposure to Russia.

Blocking of NSD Payments

As a result of sanctions laws and regulations imposed

LINK:	https://www.veon.com/media/media-releases/2022/veon-announces-launch-o...
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