Mezzanine Financing: International Experience and Russian Practice

 

Authors: Vladislav Lurye, LL.M., Evgeny Melikhov, PhD in Business and Private International Law, MBA

Summary

Over last two years, mezzanine financing has been actively adopted in Russia by large banks and some institutional investors. The total amount of mezzanine investments in Russian projects in relation to rival company buyouts, share redemption from shareholders and production upgrade, accounts for billions of dollars; and the potential is far not exhausted[1]. In the meantime, mezzanine schemes represent a comparatively new phenomenon in the Russian market giving rise to numerous practical issues. This article surveys the specifics of structuring mezzanine transactions in Russia. It may be interesting for a wide range of international and legal professionals interested in the real life funding mechanisms used in Russia given the specifics of the Russian laws and challenges of the Russian business environment. Also, the article refers to certain mezzanine practices from the United States and Europe to give comparative background or for illustration purposes.

Key words: mezzanine financing in Russia, mezzanine loan in Russia, mezzanine transactions in Russia, mezzanine investments, Russian M&A transactions, LBO, MBO, company acquisitions in Russia, structuring investment deals in Russia, shareholder agreement, option, subordinated debt.

Mezzanine tools have been used in the developed countries since 70-80-s of the last century by insurance companies, thrift and credit associations and specialized investment companies to finance leveraged buyouts (LBOs)[2]. Over time, they expanded to funding development projects, small and medium enterprises, equity restructurings and other areas where there are difficulties with obtaining a conventional bank loan. Most actively, the forms of mezzanine financing capture new fields in the periods of financial crunches; however the demand for them continues during boom times as well which is evidenced by low long-term volatility and increasing mezzanine rates during economic downturns[3].

During the 2007-2008 financial crisis, mezzanine financing gained new momentum provoking interest from a large number of financial institutions[4]. Currently, the pool of players acting as mezzanine investors include pension funds, hedge funds, insurance companies, funds accumulating money of private investors, and specialized bank entities[5]. Mezzanine investors target, primarily, stable second-tier companies that proved viable. Nonetheless, some elements of mezzanine financing are found at the initial stages of venture projects where so called “angel” investors can provide funds in exchange for convertible debt[6].

Advantages and Disadvantages of Mezzanine Financing

The interest in mezzanine financing is caused by the opportunity for an investor to get a higher return on invested capital than that within bank funding without undertaking the risks inherent in equity investments as well as by a number of benefits for a borrower, namely:

- opportunity to raise funds without sufficient security or need to comply with strict financial requirements in order to obtain a conventional bank loan as well as the opportunity to improve the terms of available bank financing (because the borrower’s maximum permitted debt to EBITDA ratio under a mezzanine loan is typically 1.5-2 times higher than under a regular bank loan; finally, raising finance from another source, with no adverse effect on the bank’s position, is perceived as a plus by banks)[7];

- lower shareholder capital dilution and, as a consequence, lower overall cost of capital for the company because equity is the most expensive capital; this argument is especially important for businesses with a high growth potential;

- retaining control over the borrower company by the existing owners: the interest of a mezzanine investor is focused on gaining the expected return on mezzanine investment[8] rather than on earnings from the maximum increase in the value of the investment object shares; therefore, it is less inclined to actively participate in the management although mezzanine creditors may be granted the rights to approve key decisions and exercise control[9];

- opportunity to defer a significant portion of payments due to investor until the full repayment of the mezzanine debt and deduct the costs of raising and servicing mezzanine finance from the borrower’s taxable income if the transaction is structured properly[10].

At the same time, mezzanine financing has some negative traits:

-expensiveness and documentation complexity in comparison with bank financing due to higher rates and individual structuring of each transaction;

- stringent requirements for the borrower’s management team, transparency and reports;

- restrains on the investor’s ability to early exit the project, especially, in the case where funding is provided to small or medium enterprises with no debt securitization[11].

Primary Mezzanine Instruments in the Western Practice

In the western practice, mezzanine financing is structured by various combinations of the following primary instruments:

1. Mezzanine Loan. Such a loan is generally unsecured in the USA and subordinated in the Western Europe. The subordination of mezzanine debt is achieved by granting the second lien or second mortgage over the property to the creditor and entering into intercreditor agreements[12]. “Structural subordination” is also possible where senior creditors enter into loan agreements with the companies holding assets secured by the mortgage of such assets or suretyship (guarantee) from such companies while the mezzanine creditor extends a loan to the holding or sub-holding company of the borrower secured by the pledge of shares (participation interests) in the companies holding actual assets[13]. Mezzanine loans are typically provided for the period of 5 to 10 years, with the borrower’s right to early repay the loan upon the expiry of a minimum period of time set out by the loan agreement that guarantees satisfaction of the creditor’s financial interests, at 12-19% per annum. The creditor earns additional income ensuring 15-25% overall return on mezzanine capital from deferred interest (PIK), participation in the borrower’s profits (participating loan), exercise of warrants or options in respect of the borrower’s shares and other mechanisms[14]. That said the overall return expected by the creditor cannot exceed the IRR of the project being funded[15].

2. Financing with investor’s «silent» participation where an investor acquires an interest in the borrower’s company but does not undertake any liability to the company’s creditors. The information about such investor’s participation is known inside the borrower’s company only and not disclosed to third parties. The terms and conditions of the investor’s silent participation in the profits, losses, management of and control over the company are determined by a confidential agreement between the investor and the borrower[16];

3. Financing from the issuance of convertible bonds providing fixed interest payments and principal repayment upon the financing period expiration with the opportunity for the investor to purchase shares in the borrower company at a conversion price determined in advance in lieu of having the principal debt repaid. Such bonds are not traded in an open market[17]

4. Financing from the issuance of bonds with warrants in respect of shares in the borrower’s company that may be traded separately from the bonds[18];

5. Financing from the issuance of preferred stock in a company of the borrower’s group conferring preferential rights to profit participation and liquidation preference as compared to the holders of the other shares in the company.

Mezzanine involving placement of securities (options, warrants or preferred stock of the borrower) differs from venture or equity financing by less advantageous terms for a mezzanine investor in terms of potential return and participation in the borrower’s management in consideration of better protection as compared to the other shareholders.

Mezzanine investor earnings in the international practice can include:

- loan use interest (fixed or floating, bond coupon; the payment of so called “deferred interest” accrued from time to time, compounded to the principal amount  and paid upon the principal repayment – “payable in kind interest” or “PIK”[19] is also possible) and/or dividends on the preferred stock held by the investor;

- one-time or periodic fees (for instance, transaction structuring, financing commitment fees), including by way of an additional discount granted when issuing the preferred stock or a certain number of share options or warrants;

- increase in the value of the borrower’s shares that are transferred to the investor or in respect of which the investor receives warrants or options as well as earnings from the sale thereof upon exercising a put option by the investor at a price exceeding the discounted price per share established for the mezzanine investor and the cost of the warrant or option itself (equity kicker);

- participation in the borrower’s profits in the form of the borrower’s revenue, EBITDA, cash flow or income percentage (participation payout);

- reimbursement of legal and other transaction-related costs at the borrower’s expense[20].

Mezzanine Financing Specifics in Russia

The word “mezzanine” traces its roots to Italian “mezzano” that means “intermediate” and comes up to Greek “mezzos” – “medium”[21]. In the world’s investment practice, the term “mezzanine financing” is used to define investment structures taking interim position between debt financing and private equity investments.

Unlike in the U.S. and Europe where a wide range of financial institutions, including insurance companies, hedge, pension and private funds, special divisions of banks are involved in mezzanine financing, in Russia, the most active players in the field of mezzanine investments are the largest banks[22] and few investment funds specializing in mezzanine lending (e.g. Sberbank, Hi Capital, NRG funds).

Like in the U.S. and EU, mezzanine financing is primarily used in Russia to assist second-tier companies that proved viable but have difficulties with raising a standard loan due to the lack of available free cash flow or collateral in order to fund:

- leverage buyouts (LBO);

- management buyouts (MBO);

- growth from equipment modernization with the expected increase of the company’s efficiency, participation in a tender for supply of goods that requires a large deposit, implementation of development and other project with expected IRR higher than 25%.

Mezzanine financing can also take the form of bridge financing when a bank extends a mezzanine loan for the period of time until the borrower manages to obtain a classical bank loan.

The first distinction of mezzanine financing in the Russian practice is that only mezzanine lending is widely used in Russia at present time. The authors are not aware of any examples where bonds or preferred stock were utilized within Russian mezzanine transactions which is seemingly caused by regulatory restrictions, higher structuring costs of such transactions as well as investor’s additional risks with no verified mitigation mechanisms.

The legal relationship regarding the provision of a mezzanine loan in Russia is divided into two components. The loan part of the transaction that serves as a guarantee of gaining the current return by the lender is executed between the lender and borrower by entering into a credit facility agreement and signing collateral documentation under Russian law. The additional (deferred) return on mezzanine investment is secured by purchasing by the lender, prior or at the time of entering into the credit facility agreement, shares (participation interest) in an SPV’s share capital (usually, up to 25%) at the nominal value or for a symbolic amount, for instance, 1 USD, as well as by executing share (participation interest) pledge agreements and options as indicated below. That said, because of limitations set forth in the regulation of the Bank of Russia in relation to the credit organization equity calculation rules and creation of provisions for loans, such shares (participation interests) are acquired not by lending banks themselves but by their project companies or through mezzanine financing funds associated with them.

Simultaneously with purchasing the above shares (participation interest), the mezzanine lender enters into put and call options in relation to the purchased shares (participation interest) that are governed by English law and provide for nominal consideration in order to validate  them as contracts with the lender’s majority shareholder (or with the ultimate beneficiary of the borrower’s group of companies). The strike (exercise) price of such options is formed in such a way that the lender would receive the expected mezzanine return if they are exercised, given the aggregate amount of the loan tranches actually withdrawn by the borrower under the mezzanine credit facility, the number of days during which the loan has been used, applicable aggregate expected rate of return, the part of the loan that has been repaid, interest, commission fees and other amounts paid out by the borrower to the lender in connection with the credit facility. The expected return rates vary based on the anticipated return under the project being funded and investor’s priorities as determined by its internal policy. In average, the expected mezzanine return rates in Russia amount to 25% per annum for the put option and 35% per annum for the call option, i.e. they are, in general, higher than in the U.S. or EU while the maturity terms under mezzanine loans are typically shorter (3-5 years).

The above put option may be exercised by its holder (mezzanine creditor) both in the event that the borrower repays the loan fully and on time without any breach of the mezzanine transaction terms and conditions, including various covenants and investor’s control and corporate management rights, and in the case of the borrower’s default under the mezzanine loan. The call option holder (majority shareholder or ultimate beneficiary of the borrower) may exercise the option provided that the mezzanine loan is fully repaid only.

In addition to the above mentioned put option, the structure of a mezzanine transaction may include the provision of an option for purchasing extra number of shares in the SPV at a discounted price taking into account the forecasted growth of the borrower’s group value to the investor, i.e. the investor’s right to participate in the expected incremental value of the borrower’s group  (investment upside) if, for example, the latter has a good IPO chances during the time when the mezzanine scheme is going to be implemented.

Nevertheless, if the borrower cannot, for some reasons, transfer a considerable part of its shares to the investor but it is able to pay the increased interest rate under a high-risk bank loan, then, there may be a scheme where all return of the investor is included in the loan interest rate, with 1 or 2 shares being transferred to the investor in order to secure its right to participate in the corporate management through a shareholder agreement. However, the set of corporate management rights is less than within a private equity transaction because they are intended to provide the mezzanine lender with control tools rather than to enable it to actively intervene in the company’s government.

In the shareholder agreement, the rights to participate in managing not only the SPV in which it holds shares but also the entire borrower’s group serving as the main instrument to control the designated use of the loan and compliance by the borrower with the obligations contained in the credit facility agreement and shareholders’ agreement. To secure the mechanism of exercising such rights, a representative of the mezzanine investor is included in the boards of directors of the key joint-stock companies of the borrower’s group and their articles of association are amended to set forth the matters that have to be decided by all the members of the board of directors unanimously. In the case of limited liability companies (LLC), the mezzanine investor purchases a minimum participation interest in the share capital of LLC and articles of association of each of such LLC are amended to include the extended list of matters to be decided by all the LLC members unanimously. Also, the shareholder agreement grants the investor the right to nominate candidates for the position of internal auditors (financial controllers)

Unfortunately, within the framework of the current Russian laws and practice of their application the full implementation of the above instruments is impossible that predetermines the second distinction of mezzanine transactions in Russia is the use of foreign elements when structuring them even though all the parties to a transaction are Russian entities.

The SPV is created abroad, usually, in a country of the common law system (Cyprus, BVI, UK) and, often, in the form of a private company limited by shares. In spite of the recent bank crisis, Cyprus remains a popular jurisdiction for establishing SPVs for investment purposes because it is well known to the Russian business and combines English law applicability with well developed nominee director and shareholder services coupled with a number of double taxation agreements, including with Russia. As described above, the investor purchases a part of shares in such SPV. The mezzanine loan may be provided either to the SPV or a Russian operating or sub-holding company directly. The decision on the borrower under the loan is made based on a number of factors. For example, using the SPV as the borrower requires artificially uplifting money to the SPV’s level because it does not generate income by itself or transferring debt to a company generating cash flow (debt push-down) which is not always acceptable given additional expenses and fiscal risks.

Options and shareholders’ agreement in relation to the SPV are, in most cases, drafted and governed according to English law to guarantee that the mechanisms that have been thoroughly tested within numerous mezzanine transactions in the developed countries are duly documented and fully enforceable which is not achievable within the Russian legal system.

To give an example, the Civil Code of the Russian Federation, the basic national law governing economic activities in Russia, does not mention shareholders’ agreements at all. Federal Law on Joint-Stock Companies and Federal Law on Limited Liability Companies, i.e. special laws governing the types of legal entities most commonly used by the Russian businesses, contain the rules on shareholder agreement (article 32.1) and so called member right implementation agreement (section 1 of article 8), accordingly. However, they have a lot of gaps and, more importantly, they are not supported by a well-established and uniform court practice. In particular, it is not clear whether the company itself as well as a creditor or future investor not being the company’s shareholder (member) at the time of entering into the shareholder agreement (member right implementation agreement) may or may not be a party thereto[23]. It is still difficult to say that the conditions aimed to protect the interests of minority shareholders that are common for shareholders’ agreements under English law, such as lockup period, right of first refusal, tag-along rights, drag-along rights, deadlock resolution, may be effectively enforced under Russian law.

In 2011, in order to incentivize Russian businesses to switch to the Russian laws when structuring investment deals the Russian authorities passed Federal Law on Business Partnership, a new legal entity designed to become a convenient investment vehicle. Article 6 of the law covers so called partnership management agreement in much more detail than the articles on shareholders’ and member right implementation agreements in the two federal laws mentioned above and eliminates some of the most critical gaps. For instance, it expressly provides for that the partnership itself may be a party to the partnership management agreement if set forth by articles of association. However, one and a half years after the law’s coming into force we can say that the above step was not sufficient to stop Russian businesses from using foreign companies and English law in structuring mezzanine and other investment deals as it is still impossible to reliably predict how Russian courts would decide disputes related the terms and conditions typical for such deals. As the Russian supreme courts have stated on multiple occasions, it is not surprising that they are not in a position to resolve potential disputes based on national rules on shareholders’ and similar agreements. The other issue is that because the SPV should be on the top of the borrower’s corporate structure to fit the investor’s requirements, using the new legal form would force Russian borrowers to implement time consuming restructuring process under the Russian laws, including tax and antitrust regulations that are far less flexible than in the foreign jurisdictions mentioned above.  

As per the option agreements, the main problem here is a generally restrictive construction by Russian courts of the parties’ liberty to determine the option exercise (trigger) events as many of them are potestative, i.e. more or less dependent on the will of one of the parties[24] (for instance, achievement or failure to achieve by the borrower of certain financial ratios).The study of the latest practice of applying article 157 of the Civil Code of the Russian Federation that regulates conditions precedent by arbitration courts shows that there is no clear and uniform understanding of the legitimacy and permitted volume and scope of such conditions among the Russian arbitration courts[25]. No uniform approach has been elaborated at the level of the Supreme Arbitration Court of the Russian Federation which stated in one of its rulings that article 157 of the Civil Code of the Russian Federation does not contain “any provisions prohibiting to tie the occurrence of certain rights and liabilities to the actions of one of the parties to a transaction”[26] but avoids that issue in its other act which, in fact, means that it supports the opposite approach[27].

Furthermore, using the conditional transaction structure may be hampered by the provisions of special laws. Thus, section 12 of article 21 of Federal Law on Limited Liability Companies provides for imperatively that the title to a participation interest in the share capital of an LLC passes to the acquirer thereof as of the time when the transaction aimed to dispose of it has been certified by a notary public. Such transactions must be certified by a notary public; otherwise they are invalid. As a result, modeling an agreement for sale and purchase of a participation interest in an LLC share capital as a conditional transaction turns out to be a task that is hard to accomplish. There are two possible ways of resolving such a situation: either to include all the liabilities in a contract governed by English law, accompanied by the form of the sale and purchase agreement under Russian law that the parties are obligated to sign and certify before a notary public after all the conditions precedent have been met or divide the participation interest acquirement process into two phases: entering into a participation interest sale and purchase agreement in writing with the parties’ obligation to apply to a notary public for notarial certification of the agreement (the dispositive part of the transaction) upon satisfying certain conditions. The second option is riskier as it is impossible to warrant that it will be held lawful by a Russian court in the event of a dispute because of the restrictive practice regarding the application of article 157 of the Civil Code of the Russian Federation.

The third distinction is that fully-featured contractual claim subordination mechanisms in their classical form have not been developed in Russian law. The notion of a subordinated loan is used in the Russian laws with regard to credit organizations (which include banks and non-banking credit organizations) only[28]. As a result, the structural subordination is primarily used in the Russian mezzanine financing practice when the mezzanine loan, unlike the “senior” debt secured by mortgage, is secured by the pledge of shares in the borrower’s holding and operating companies and suretyship from the ultimate beneficiary of the borrower’s group, or, at best, by subsequent (second) mortgage on the assets owned by the borrower’s group. That said, the inter-creditor agreement[29] and subordination agreement institutes that play a crucial role in structuring mezzanine transactions in the international practice are not sufficiently regulated by the Russian laws. Although such agreements are not prohibited and may be executed under general contract rules contained in the Civil Code of the Russian Federation they may conflict with the provisions of special rules such as those concerning execution and enforcement of pledges and mortgages; plus, Russian courts are usually very cautious about unfamiliar contractual tools that are not covered by legislation; therefore, it is not possible to reliably predict their attitude to such agreements in the event of a dispute.

English law does not have the above weaknesses and, inter alia, it allows for the inclusion of additional conditions on covenants typical for English financial transactions in shareholders’ agreements. This is very important because the validity and enforceability of such conditions, for instance, on the compliance with the amount of the borrower’s consolidated net debt and threshold net debt to EBIDTA/revenue/interest accrued on debt liabilities ratios, cannot be guaranteed within a Russian credit facility agreement. Breach of such financial liabilities by the borrower is deemed to be a default under the primary shareholders’ agreement giving rise to the mezzanine lender’s right to demand that the put option be executed, meaning, in fact, early divestment.

Specific Example of Using a Mezzanine Loan in Russia

The mezzanine financing utilization in Russia can be illustrated by an LBO example. Often, the assets of the acquirer are not sufficient to raise standard bank financing for such a transaction. Russian banks are reluctant to lend for M&A transactions because it is difficult to assess the risk related to the client. Even though a bank agrees to finance such transaction, the interest rate under such loan will be considerably higher than under a standard secured loan and the funds available for the acquirer and the acquired company may be not enough to serve it.

In such a situation, an alternative to a standard bank loan may be (i) finding a co-investor which will, however, result in a dilution of the acquirer’s control over the acquired company or (ii) raising mezzanine financing that will allow for implementation of the transaction retaining the acquirer’s control over the acquired company and ease the financial pressure on the acquirer during a difficult period of integration with the acquired company’s business. The point is that the current interest payments under a mezzanine loan are lower than under a standard loan with increased risk and a higher return on mezzanine capital is guaranteed by the deferred income to be paid out at the end of the mezzanine scheme’s implementation period when the synergy expected from the M&A transaction has been achieved.

The standard LBO transaction structure in Russia is given on the chart below.

 

Conclusion

Although mezzanine finance is a comparatively expensive and complex tool, it has obvious advantages for the investor and the borrower; and, in some cases, it provides really unique opportunities. It is not surprising, therefore, that it finds its application in the Russian market, although to a limited extent: through extending mezzanine credit facilities (loans) by large financial organizations with the use of structural subordination, shareholders’ agreements, share (participation interest) pledges and options. Because of the Russian law specifics and lack of uniform practice on many key issues, Russian parties to mezzanine transactions actively use English law institutes. Nevertheless, in spite of difficulties, gradual increase in the number and quality of such transactions has been observed which gives grounds to optimistically look at the future of mezzanine financing in Russia and expect that Russian mezzanine transactions will be sophisticating provoking higher interest in the legal and economic matters related thereto.

 

[1]See, e.g.: Ben Aris. Mezzanine finance appears in Russia: [Electronic document] (http://www.bne.eu/story4809/Mezzanine_finance_appears_in_Russia).

[2]See, e.g.: Corry Silbernagel, Davis Vaitkunas (Bond Capital). Mezzanine Finance with a Supplement by Ian Giddy: [Electronic document] (http://pages.stern.nyu.edu/~igiddy/articles/Mezzanine_Finance_Explained.pdf). P.2,6; Pushkin A. LBO Transactions. The New Word in Mergers and Acquisitions: [Electronic document] (http://www.tencon.ru/article/91).

[3]See: Middle Market Mezzanine Debt. Babson Capital White Paper. August 2010: [Electronic document] (http://www.babsoncapital.com/BabsonCapital/http/bcstaticfiles/Research/file/Babson%20Capital%20Mezz%20Middle%20Market%20WP.pdf). P.4-5.

[4]See: Arthur D. Robinson, Igor Fert, and Mark A. Brod, Simpson Thacher & Bartlett LLP. Mezzanine Finance: Overview: [Electronic document] (http://us.practicallaw.com/2-502-3062). P.1-2.

[5]See: Corry Silbernagel, Davis Vaitkunas. Op. cit. P.6.

[6]See: Brad Feld, Jason Mendelson. Venture Deals: Be Smarter than your Lawyer and Venture Capitalist. - Second Edition. - John Wiley & Sons, Inc. 2013. Chapter 8.

[7]See: Corry Silbernagel, Davis Vaitkunas. Op. cit. P.4-7.

[8]See: Petrikova E.M. Mezzanine Loan as an Alternative to the Project Financing of Investment Projects // Finance and Credit. 2013. No. 28 (556). P.41.

[9]See: Roundtable between Bankers and SMEs. Mezzanine Finance. Final Report. European Commission: [Electronic document] (http://ec.europa.eu/enterprise/newsroom/cf/_getdocument.cfm?doc_id=1065). P.7.

[10]I bid. P.7.

[11]I bid. P.7-8.

[12]See: Arthur D. Robinson, Igor Fert, and Mark A. Brod. Op. cit. P.4.

[13]I bid. P. 3; Corry Silbernagel, Davis Vaitkunas. Op. cit. P.9.

[14]Corry Silbernagel, Davis Vaitkunas. Op. cit. P.7; Middle Market Mezzanine Debt. Babson Capital White Paper 2010. P.7.

[15]See: Petrikova E.M. Op. cit. P.41.

[16]Roundtable between Bankers and SMEs. Mezzanine Finance. Final Report. European Commission…P.6.

[17] See: Petrikova E.M. Op. cit. P.46.

[18]I bid. P. 7.

[19]See: Corry Silbernagel, Davis Vaitkunas. Op. сit. P.8; Petrikova E.M. Op. cit. P.42.

[20]See: Arthur D. Robinson, Igor Fert, and Mark A. Brod. Op. cit. P. 2-3; Corry Silbernagel, Davis Vaitkunas. Op. cit. P. 8; Roundtable between Bankers and SMEs. Mezzanine Finance. Final Report. European Commission…P. 6.

[21]Wikipedia. Mezzanine: [Electronic document] (http://en.wikipedia.org/wiki/Mezzanine).

[22]See, e.g.: Shalygin I. Sberbank Has Liked Mezzanine Financing: [Electronic document] (http://www.rbcdaily.ru/finance/562949987555741).

[23]See, e.g.:  Osipenko O. Shareholders’ Agreements Institute: Considerations at the Start of the Law-enforcement Marathon // Mergers and Acquisitions. 2009. No. 9 (79). P. 44-51.

[24]See, e.g.: Karapetov A.G. Dependence of Conditions upon the Will of the Parties to a Contingent Transaction in the Context of the Civil Law Reform // Bulletin of the Supreme Arbitration Court of the Russian Federation. 2009. No. 7. P. 28-93.

[25]See, e.g.: Decisions of the Arbitration Court of Moscow Region dated 09.09.2013 in case no. А41-17245/13, Arbitration Court of Primorsky Territory dated 15.07.2013 in case no. А51-5710/2013, Arbitration Court of the City of Saint-Petersburg and Leningrad Region dated 04.03.2013 in case no. А56-47233/2012, Judgment of the Eight Arbitration Court of Appeals dated 30.07.2012 in case no. А75-10035/2011, etc.

[26]Ruling of the Supreme Court of the Russian Federation dated 24.11.2011 No. VAS-15632/11.

[27]See, e.g.: Karapetov A.G. There Now, Potestative Conditions Has Limped to the Supreme Arbitration Court: [Electronic document] (http://zakon.ru/blogs/nu_vot_potestativnye_usloviya_dokovylyali_i_do_vas/4074).

[28]See: Bank of Russia’s Regulation dated 10.02.2003 no. 215-P On the Methodology of Determining Own Funds (Equity) of Credit Organizations.

[29]See, e.g., the model form of such agreement developed by Dechert lawyers (http://www.firstam.com/assets/ucc/articles/intercreditor-form.pdf) and most update version on the Loan Market Association web-site (http://www.lma.eu.com/documents.aspx#c60).