New year surprise: «Rosneft» and AFK «System» has signed the world

© RIA Novosti / Ramil to Setdiscoverable in fotobounce company AFK Sistema. Archival photoNew year surprise: «Rosneft» and AFK «System» has signed the world© RIA Novosti / Ramil to Setdiscoverable the image Bank

«Rosneft» and AFK «System» a week before the New year settled a lawsuit, which lasted almost eight months.

On Friday night, the parties announced that it has entered into a settlement agreement, under which Sistema JSFC undertakes to pay Bashneft 100 billion rubles of own and borrowed funds until March 30, 2018, whereas only on the first claim of the oil companies, the court ordered the System to pay more than 136 billion rubles, and the total amount of claims amounted to about 300 billion rubles.

Meanwhile, the Russian direct investment Fund (RDIF) and the savings Bank will help AFC and its «daughter» of JSC «Sistema-invest» in raising funds to make payments. After full repayment of the specified sum, the parties undertake to renounce mutual claims.

Analysts described the terms of the agreement as a positive surprise for the AFC, which the market did not expect.

«I think it’s a very unexpected positive outcome for AFK «System» in this situation. No one, in principle, such a positive scenario for them, I think, did not expect,» commented the analyst of «Opening» Alexander Vengranovich.


The Russian direct investment Fund (RDIF), which facilitated the negotiation of the settlement agreement, noted that this agreement will serve to create a favourable investment climate in Russia.


How it all began

The Moscow arbitration court on may 2 had registered the claim of «Rosneft» and affiliated «Bashneft» for the recovery of more 106,6 billion rubles from Sistema and its subsidiaries, JSC «System-invest». Later, the court added in the case of Bashkiria as a co-plaintiff and adopted increased requirements on the claim — is 170.6 billion.

The first defeat in this dispute, the AFC suffered in August. Then the arbitration of Bashkiria partially satisfied the claim of «Rosneft», it is under control of Bashneft and Bashkir to recover from Sistema and its subsidiary JSC «Sistema-invest» for damages caused by in 2014 Bashkir oil company during its reorganization. «The system» to the end of 2014 owned a controlling package of shares of «Bashneft». The first instance court recovered in favor of Bashneft 136,3 billion.

World and the new lawsuits

In September, Rosneft offered the following terms of the settlement of the dispute: Sistema pays recognized by court damage 136,3 billion rubles, «Rosneft» does not require increasing the amount recovered and does not present a new claim. In early December, «Rosneft» said that as the intermediary in negotiations with AFK «System» for a peaceful settlement was attracted by the FUND.

In December, together with «Bashneft», «Rosneft» has submitted to arbitration of Bashkiria a new claim to the AFC and its «daughter» — JSC «Sistema-invest» — on of 131.6 billion. This is the sum of dividends received by the defendants from Bashneft from 2009 to 2014, minus taxes paid.

Sistema, in turn, in December, filed in the Moscow Arbitration court the counterclaim to «Rosneft» and «Bashneft» about damage compensation on 330,4 billion, accusing the defendants of actions aimed at reducing the cost of the Corporation and bringing it to bankruptcy.

The first lawsuit looming payments

On the August decision of the Bashkortostan arbitration on collecting with «the System» 136,3 billion of the appeal filed as the AFC and the plaintiffs sought the full satisfaction of their claims in 170,6 billion.

On 18 December the Eighteenth arbitration appeal court left without changes the decision of the Bashkir court. Thus, the decision of the court of first instance came into legal force.

AFK «System» 18 Dec stated that it plans to enforce the judgment «in accordance with the law». The company will simultaneously appeal the decision of the court of appeal by submitting a cassation to the court of Arbitration of the Ural district.

In the AFC did not specify by what means you plan to pay Bashneft 136,3 billion.

As at 30 September 2017 AFK «System» had to be free of 20.4 billion rubles, including highly liquid deposits and liquid financial instruments. In addition, at the end of 2016 AFC needs to 9.8 billion roubles in dividends from subsidiaries – MTS (51,93%) and BESK (100%), but access is restricted due to the arrest of those assets under litigation.

Analysts noted that the Corporation, all assets which arrested a few options for payment of the amount of the claim. Sergey Libin from Raiffeisenbank believed that virtually the entire amount will need to borrow.

In the first claim of the Bashkir arbitration in June, at the request of «Rosneft» has seized on belonging to the «System» and «System-invest» 31,76% of MTS shares, 100% shares of the group and 90,47% stake in BESK, banning the disposal of assets.

In the framework of the December claim as an interim measure, the court arrested the following assets of AFK: 52,09% shares of PJSC «Children’s world», 90.5% of shares in JSC «Agroholding «the Steppe», 71,87% stake in MTS Bank, a 100% interest in OOO «Sistema Telekom aktivy», 98,78% of shares of JSC «Leader-invest», 16,18% share in OOO «GK «Segezha», 88,78% share in LLC «Group of Kronstadt», 45,96% of share of OOO «System of Hotel Management», 27% a share of «joint bridge-building enterprise». The court ruling limits the right of PJSC «AFK «Sistema» and JSC «Sistema-invest» to receive income (dividends) at the arrested securities and shares.

Christmas surprise

Analysts believe the terms of the agreement, Sistema with «Rosneft» and «Bashneft» a positive outcome for the Corporation, which the market did not expect.

«If the international agreement is implemented, it is good for «the System» regarding the court decision, which is already out, and the subsequent courts. The market feared that the «System» can lose… So whatever the justice of this decision, this is a positive surprise for AFC,» said the analyst of «URALSIB capital» Konstantin Belov.

Agree with him Alexander Vengranovich of «Discovery». «Judging by the current dynamics of the stock, probably, participants of the market have something already expected. I think in General it is still rather unexpectedly positive outcome for AFK «System» in this situation. No one, in principle, such a positive scenario for them, I think, did not expect,» said Vengranovich.

Shares of AFK by the close of trading Friday rose by 16.74% to 9.62 ruble. During the day they were jumped by 23.8% to 11.9 rubles — a maximum of 7 Dec.

Analysts believe that, for AFC pay 100 billion rubles is not critical and will not affect its financial position.

«We have always said that even the amount of 136 billion rubles is a large sum, but it is for the» System» is not critical, and 100 billion — still less,» — says Belov.

«Given all the conditions, including that the Bank and the FUND will provide financing, this «System» done, in principle, will be easy, no risks for their financial stability is not created. However, I believe that even the other assets will not be affected,» — said Vengranovich.

«Yes, there will be additional debt burden, «the System» in principle have almost the entire cash flow from MTS to spend on interest expense and debt repayment. That is quite heavy in General, the situation for the AFC, but due to the monetization of the assets in the future through an IPO, and so on – I think they will be able to ensure that the debt burden over time to reduce,» added the analyst.

Itself the AFC said that the Bashkir agrees to pay the company 100 billion rubles up to 30 March 2018 from own and borrowed funds.