Fortenova Grupa v Shushary Holding: The UK High Court grants order for payment into court - A solution for sanctioned companies seeking loan note redemption
In a recent case, Fortenova Grupa D.D. v LLC Shushary Holding & Ors, the UK High Court made a significant decision regarding a company's ability to redeem loan notes before their maturity date in the face of UK, EU, and US sanctions. The court granted an order allowing the company to pay the redemption amounts into court, enabling the necessary steps for the release of security.
The case involved Fortenova Grupa D.D. (Fortenova), an EU company, and LLC Shushary Holding, a subsidiary of VTB Bank PJSC, a well-known Russian bank subject to sanctions imposed to Russia. Fortenova wished to redeem loan notes held by the Russian subsidiary prior to their maturity date in September 2023 as part of a proposed refinancing. However, the company faced obstacles due to the sanctions, preventing payment to the Russian subsidiary. Consequently, Fortenova requested an order for payment into court to allow for the loan note redemption.
The Court granted the company's application for an order to pay the redemption amounts into court, allowing the release of security in the Russian subsidiary's favour. This approach ensured that the Russian subsidiary could apply for the funds once the sanctions were lifted. Additionally, the Court declared that the company was not liable for default interest on the notes.
Implications for financial institutions
The Court's decision holds significance for financial institutions navigating the complexities of dealing with sanctioned entities. The recent judgment sheds light on the challenges faced by companies operating in the context of sanctions. The Court's decision to allow payment into court and release of security provides a viable solution for companies seeking loan note redemption. Financial institutions should take note of this case as it contributes to the evolving case law surrounding sanctioned entities and their rights in such circumstances.
The full judgment of Fortenova Grupa D.D. v LLC Shushary Holding & Ors  EWHC 1165 (Ch) can be accessed here.