Page 89 - RusRPTMay19

re-sold by unsuspecting investor attracted by 2-3pp premium to average market yields and solid unstained name of the issuer.
On January 25 2019 the CBR has already cancelled 61 subordinated issues for 7 banks and those willing to re-issue the bonds will have to do so by the new rules. Solvent subordinated issues in circulation can still be traded as before.
Under the new rules only companies older than 5 years, with no defaults, and A-rated nationally can continue to issue perpetual bonds. This leaves only a handful of state companies such as Russian Railways, Rosneft, Gazprom, Gazpromneft, Federal Grid Company. At least 95% of the shareholders' votes will be required to issue.
The problem with perpetual bonds for the CBR was that the issuer had the right to skip coupon payments, which allowed the instrument to be booked as capital under IFRS. For companies, this would not pressure Ebitda and make the instrument attractive, but poses risks for investors.
The CBR will now encourage issues of preferred shares that prioritise and/or guarantee dividend payment, while excluding voting rights claims, making it essentially a fixed income instrument, the central bank official said.
89 RUSSIA Country Report May 2019 www.intellinews.com