Western-based bondholders of GTLK Europe, a Dublin-based aircraft and ships lessor owned by Russian state-owned GTLK - State Transport Leasing, have started contacting insolvency practitioners to judge what their next steps could be in dealing with the company as its debt defaults mount amid international sanctions, sources have told The Irish Times.

GTLK Europe has USD3.25 billion of bond debt due to mature between 2024 and 2029. After Russia’s invasion of Ukraine on February 24 last year, the European Union began to unleash sanctions against targeted individuals and entities, expanding the list in April to include GTLK and its subsidiaries GTLK Europe, GTLK Asia, and GTLK Middle East. The United States followed suit in early August.

GTLK Europe, which has state-run flag carrier Aeroflot (SU, Moscow Sheremetyevo) as its main customer, is understood to have transferred a USD14.9 million interest payment due on one of its bonds last April to its funding unit based in Dublin, but the money could not be disbursed due to the sanctions. It then defaulted on interest payments between May and August worth USD71.5 million.

In an update posted on its website in October, it claimed to have “now received authorisations from the Central Bank of Ireland under council Regulation (EU) No 269/2014 of 17 March 2014 to make” its back schedule of payments to the London branch of the Bank of New York Mellon as the “principal paying agent.” But it has not yet secured clearance from US sanctions authorities to release the cash.

On January 10, 2023, parent company GTLK posted its own update, saying it “is working on an optimal mechanism for fulfilling obligations under the GTLK Europe Capital DAC and GTLK Europe DAC Eurobonds, taking into account the current sanctions restrictions and requirements established by the decrees of the President of the Russian Federation.” To this end, it had hired “an external legal consultant, a firm with significant experience in advising large Russian companies on similar issues.”

It stressed that US, EU, and UK sanctions had made it impossible to pay coupon income to bondholders without obtaining licences but that it “continues to interact with regulatory and infrastructure organisations on this issue. GTLK remains a responsible and reliable borrower. Fulfilment of payment obligations is our priority.” The company pledged to keep bondholders informed of further developments.

Nevertheless, some bondholders have contacted insolvency practitioners as they weigh their options. One firm among the bondholders that is reportedly pushing for a resolution is Attestor Capital, but a spokesman for it declined to comment. Roman Lyadov, GTLK Europe’s chief executive, did not respond to requests for comment.