Market Spotlight: Restructuring in Russia, CIS, and CEE

By Suzy Bibko, Content Marketing Manager, EMEA

What lies ahead for dealmaking in Russia, CIS, and CEE now that COVID – at least in some markets - is beginning to subside? We asked Laura Brank, Ashley Messick, and Markus Schiller this question at a recent webinar in partnership with Debtwire and moderated by Nickolay Ivin, and whether we’ve already seen the worst or if we should expect more liability management and debt restructuring deals going forward.

Optimism and opportunities
Despite the economic impact of COVID and increased sanctions and their impact on the ability of Russian issuers to raise new debt on international markets, Brank remains positive. “I think that there is going to be a big upside this year,” she reveals. “In Russia, FDI was down 96%. So, there's a lot of pent up demand. We're seeing more and more term sheets. We also have a number of RFPs related to IPOs. And we’re seeing joint ventures more in the context of turning debt into equity rather than going through bankruptcy proceedings to go after the debt. I think we're going to see a lot of those distressed debt type of deals going forward. So, I think that there's still a lot of optimism.”

Schiller agrees, despite deal volumes being down last year. “We've continued to see stability. Real estate, mining and metals, and coal and gas probably remain the highest value sectors. And like almost everywhere else, technology has also become a hotspot for venture capital and private equity. So, we expect to see some more activity there, especially domestically. But we’re also seeing a pickup in joint ventures. Not having to go full in and take the full risk is something we see more and more of and seems to be an interesting model for everyone. Last year was obviously not a great year, but we are seeing a bit more of a positive outlook now and we see more opportunities and more risk-takers.”

Activity and value
Messick, too, hopes that things will change for the region. “I hope people will look at the Russian market with a fresh pair of eyes,” she says. “And although Western investors have been nervous of potential sanctions and policy changes, they do want to work and remain active in the region.”

She thinks funders are missing out on great opportunities in Russia. “There is a growing trend of litigation funding. I've seen a lot of new funders join the market, especially for those with a bigger risk appetite, those with more jurisdiction understanding when it comes to Russia and CIS and, and with that I've seen more interest in the litigation aspect of insolvency. So, I really hope that trend continues. But it's certainly been interesting to see and, hopefully, hopefully we'll see more successful litigation and successful insolvency recoveries coming around and bringing value into some of these companies.”

Technology and transparency
Schiller believes that technology can add further value for the region – to both the dealmaker and the deal. “What we’ve heard from investors or potential buyers in the past, particularly in these markets, is that the lack of transparency is always a burning issue. Better technology has helped increase transparency. We're on a very different level than five or six years ago, when AI or blockchain were just buzzwords. Now, we have an automated understanding of documentation, embedded translation, and AI can be used to index, categorize, and even redact deal documents, especially in restructuring where volumes and time play such a big role. Having a fast-tracked understanding and increased efficiencies – regardless of transaction type or size – has become reality, and we're seeing more demand for this mature and professional platform. The market realizes that the cost of this technology is minimal in regard to the liability and risk.”