VK transfers the head structure and securities to Russia
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VK has announced it is delisting from the London Stock Exchange, where trading in its receipts and bonds has been frozen since last year due to hostilities in Ukraine. The company will conduct an initial listing on the Moscow Exchange and transfer the head office to Russia. Investors and analysts positively assessed VK’s decision.
VK announced termination activities of its structure in the British Virgin Islands VK Company Limited and the intention to register an international company in the Kaliningrad region. VK announced the intention to redomiciliate in February of this year, now the decision was approved by the shareholders and the board of directors. The company will soon submit documents for the registration of the international company PJSC “VK” in the Kaliningrad region, the legal entity will be the head structure of the company, said a Kommersant source familiar with the process.
In parallel, VK has decided to delist global depositary receipts and Eurobonds maturing in October 2025 from the London Stock Exchange.
The company said that the expected delisting date for GDRs and bonds is September 12, 2023.
VK intends to get an initial listing of shares on the Moscow Exchange (currently, VK GDRs are traded on it). The company declined to clarify the details of plans for obtaining a primary listing on the Russian site.
In VK reporting, the debt burden as of June 30 is 172.7 billion rubles. (growth by 48.2 billion rubles since the beginning of the year), of which 70.9 billion rubles. (+45.7 billion rubles) accounted for by ruble and dollar bonds. In March, VK reported that at the end of 2022 it bought back 66% of the entire issue of convertible bonds with a par value of $263 million. For this, as Kommersant reported, it received a loan from the government.
Listing on the London Stock Exchange in the current conditions was economically meaningless for VK, says Anna Avakimyan, chief analyst at RegBlock: trading in the company’s securities is frozen, “non-resident investors are afraid of the implementation of primary or secondary sanctions, and it is more convenient for Russian investors to work with domestic sites.” As a result of the redomiciliation, investors in VK capital will soon receive company shares instead of GDRs, said Ilya Khersontsev, executive director of the Retail Investors Association. Holders of VK Eurobonds in the Russian Federation will have the right to replace them, and the substituted securities will already be able to circulate on the Moscow Exchange, says Alexander Berkunov, Board Member of the Bondholders Association.
An international company is the only status that companies can have when redomiciliating to Russia, while both the process itself and the subsequent existence of a company in this format require significant costs, says Vladislav Chukanov, lawyer, expert at the Moscow Digital School educational platform: “Companies, for example, undertake invest in the Russian Federation at least 50 million rubles. At the same time, the status also gives tax incentives for dividends, up to a zero rate, adds Kirill Lyakhmanov, chief legal adviser of the intellectual property practice of the law firm EBR. The choice between two special administrative regions (SARs) allowed for redomiciliation – in the Kaliningrad region and in Primorsky Krai – is usually made based on business processes, “from the point of view of the regimes, the SARs themselves are the same,” Mr. Chukanov added.
The price of VK receipts on the Moscow Exchange at the end of the main trading session on August 11 amounted to 775 rubles, which is 1.7% higher than the closing price of the previous day.
The price peaked during the trading day at the opening, when VK announced its re-domiciliation: the price of securities reached 783 rubles.
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