Sistema warns of growing alarm among creditors over Rosneft case

Russian conglomerate Sistema has triggered a technical default on $66m worth of debt, as its finance chief warned of growing alarm among creditors over its legal battle with state-controlled oil company Rosneft.

A regional court last month ordered a freeze on $3bn of assets held by Sistema, including a controlling stake in mobile phone company MTS, and that freeze triggered a technical default on an undisclosed debt held by the group, a spokesman said.

Shares in Sistema, one of Russia’s largest private business groups, fell 2.5 per cent and its eurobond yields jumped above 10 per cent after the default announcement on Monday.

“The situation is gradually beginning to deteriorate, and this is quite obvious,” chief financial officer Vsevolod Rozanov told the FT. “Further deterioration is possible.”

A tranche of debt payments comes due in “the coming weeks” he added, without providing details.

“Among our creditors are a large number of serious financial institutions — Russian state-owned banks, Chinese public and private banks, European banks — and we understand that the alarm they have is growing,” he said.

Rosneft, controlled by the Kremlin and run by Igor Sechin, a powerful associate of Russian president Vladimir Putin, brought a case against Sistema in May, accusing the group of stripping assets from Bashneft, an oil producer now owned by Rosneft but previously held by Sistema.

Investors view the outcome of the case, which has chilled sentiment in the Russian market, as an important barometer for private ownership in the country.

Sistema denies the charges, saying its actions were legal and documented, and arguing that Bashneft’s value rose under its ownership. The next hearing will take place on Wednesday.

Shares in Sistema, controlled by billionaire oligarch Vladimir Yevtushenkov, have halved since the $2.8bn lawsuit was announced, while its eurobond yields have more than trebled.

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