Western bond creditors of Dublin-based GTLK Europe, the Kremlin-controlled aircraft and ships lessor, have been making inquiries with Irish insolvency practitioners as they weigh their options as the company’s debt defaults mount amid international sanctions, according to sources.
GTLK Europe, which was set up in 2012 and has an address on Hume Street in Dublin, has $3.25 billion (€3 billion) of bond debt due to mature between 2024 and 2029. The company, which also has a funding unit based in Dublin, had 70 aircraft and 19 sea vessels on its balance sheet, with total assets of $4.5 billion as of the end of 2020, according to a presentation on its website.
The ultimate outcome may set a precedent for other sanctions-affected Irish funding vehicles set up by Russian companies in the decade leading up to Russia becoming a pariah state as a result of the Ukraine war.
The Irish company, a unit of JSC STLC, Russia’s largest leasing business, was initially set up to lease aircraft to Aeroflot, the fellow state-controlled company which remains its main customer.
Aeroflot suspended all international flights in early March, as it was hit by western sanctions resulting from Russia’s invasion of Ukraine on February 24th. While GTLK Europe transferred a $14.9 million interest payment due in April on one of its bonds to its paying agent, the money has remained locked up amid western sanctions.
GTLK Europe subsequently defaulted on €66 million of interest payments that fell due between May and August as it struggled to get the required authorisations to release the funds. While the Central Bank of Ireland granted the company derogations from EU sanctions to make payments on the bonds, GTLK has not yet secured the necessary clearance from US sanctions authorities to release the money.
The parent group STLC informed bondholders in recent weeks that it has hired a legal consultant to advise on “an optimal mechanism for fulfilling obligations” under the GTLK Europe bonds.
“STLC also continues to interact with regulatory and infrastructure organisations on this issue,” it said. “STLC remains a responsible and reliable borrower. Fulfilment of payment obligations is our priority.”
However, sources say that holders of GLTC Europe bonds have also contacted Irish insolvency practitioners as they assess their options. UK investment firm Attestor Capital is among GTLK Europe bondholders agitating for a resolution to the matter. A spokesman for Attestor declined to comment.
GTLK Europe’s chief executive, Roman Lyadov, did not respond to questions put to him on Tuesday by The Irish Times.
In the UK, Russian owned investment brokerage Sova Capital and the local unit of Russian banking giant Sberbank were each put into special administration, an insolvency process, early last year as they were hit by western sanctions. The administrators in both cases have been working closely with the UK Financial Conduct Authority (FCA). The London arm of Russian bank VTB was placed in administration last month.
Documents for GTLK Europe’s most recent bond, issued in October 2021, said Aeroflot accounted for 40 per cent of its leased aircraft at that time, with other Russian carriers making up a further 34 per cent. The parent group, STLC, said in November that four Russian airline customers IrAero, Siberian Light Aviation, Aeroservice and Azimuth, had restructured lease agreements with the company as they were hit by a weakening economy.
Listed international customers in the 2021 document included EasyJet. That carrier moved within weeks of the Ukraine war to terminate the lease agreements on the six GTLK aircraft.