Bond Offer (Option) under Russian laws

An offer is a proposal to enter into a contract on predetermined conditions that is addressed to either a limited or an unlimited number of persons.

With regards to securities (specifically bonds), the issuer has a right and, to the extent permitted by the resolution on bonds’ issue, an obligation to purchase the bonds placed by such an issuer. The purchase of bonds of the same issue shall be effected by the issuer under the same conditions.

Disclosed or submitted information on bonds’ purchase shall contain:
1) information that makes it possible to identify the bonds purchased by the issuer, including the issue registration number;
2) number of bonds of the respective issue purchased by the issuer, if the obligation to purchase bonds is not specified in the resolution on bonds’ issue;
3) price of bonds or procedure for its determination, period of payment for bonds purchased;
4) procedure and period of holders’ application for purchase of bonds by the issuer.

A call offer (a call option offer) is characterized by the right of an issuer to redeem the bonds issue in full or in part on a certain date. In case of the call offer, an investor shall, in its turn, provide bonds for redemption. Bonds that are subject to a call offer are referred to as callable bonds.

An example of bond issue with several call offers is KAMAZ, BO-12.

A put offer (a put option offer, an irrevocable offer) is characterized by the investor’s ability to call for redemption on a certain date. The issuer, in turn, shall purchase (redeem) the bonds submitted on the date of the offer. Bonds that are subject to the put offer are referred to as puttable bonds.

According to Russian law, a put offer is made immediately after the last coupon for which the rate is set. For example, in regard to the bond issue Samolet Group of Companies, BO-P06, a put offer was made on August 17, 2020, under which the bonds were called for redemption within the last 5 business days of the 4th coupon period, and the purchase date was defined as the 3rd business day from the end of the call period. The rate of 1-4 coupons on the bond issue was set based on the results of the placement, held in August 2019. An additional offer is scheduled by the issuer at random, within its meaning, it is a put offer (the bondholder is entitled to call for redemption).

An example of bonds issue with several additional offers is Pioneer-Leasing, BO-P01.