The specter of a liquidity crisis refuses to go away for VEON, an Amsterdam-headquartered Group that does most of its business in Russia.

Following EU sanctions imposed on Russian oligarchs Mikhail Fridman and Petr Aven in the wake of Russia's invasion of Ukraine, a number of international lenders that secured a $1.25 billion revolving credit facility (RCF) for VEON last March are now "reviewing their relationship" with VEON according to the Financial Times (paywall applies).

Fridman and Aven had their assets frozen last week, which includes their stakes in LetterOne, an investment group. In turn, LetterOne holds a 48% stake in VEON. Fridman and Aven subsequently stood down from the LetterOne board, while Fridman gave up his position as VEON director.

Figure 1: According to the FT, JPMorgan's credit analysts said that VEON's "ability to maintain sufficient cash flow on an ex-Russia and Ukraine basis is not obvious."
(Source: Pavel Kapish/Alamy Stock Photo)

Unnamed sources say the banks involved in granting the RCF, as well as other loans to both the VEON parent company and its subsidiaries, are trying to ascertain whether all this lending complies with rules around individuals placed under sanctions. Another reported concern is what the US Office of Foreign Assets Control might think.

Citigroup coordinated the $1.25 billion RCF, said the FT, with Barclays, Crédit Agricole, ING, JPMorgan, Raiffeisen and Société Générale among the lenders.

At the end of last month VEON withdrew $430 million of the facility to pay off a bond that matured. It leaves $820 million undrawn under the RCF.

We've got enough cash, says VEON

Although the VEON share price has inevitably suffered since Russia's invasion of Ukraine, it got a slight bounce early today following a liquidity statement issued by VEON yesterday.

"We have entered this period with sound liquidity levels," it read. "USD 2.1 billion cash and deposits, including USD 1.5 billion held at the HQ level in Amsterdam in EURO or USD denominations."

The statement goes on to assert that VEON "has a diverse shareholder base, substantial free float, a majority of independent directors, and operates globally."

The Group stressed once again that VEON should not be subjected to any sanctions since Fridman and Aven held minority stakes in LetterOne, and that LetterOne is a minority stakeholder in VEON. "While sanctions have impacted certain shareholders, the impact of those individual sanctions does not flow down to Veon in a manner that subjects it to sanctions," read the statement.

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On March 4, however, as reported by the FT, JPMorgan's credit analysts said that VEON's "ability to maintain sufficient cash flow on an ex-Russia and Ukraine basis is not obvious" and a refinancing of its $5.5 billion debt pile would be "challenging in the current backdrop."

Fitch downgraded VEON's credit rating last Friday to a junk grade citing its limited access to cash in Russia and Ukraine.

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— Ken Wieland, contributing editor, special to Light Reading