APPLICATION FOR RECEIPT OF INVESTORS’ CONSENT (WAIVER) ON ALIENATION OF SHARES OF MATERIAL SUBISIDARIES IN RUSSIA Riga, 2022-03-16 14:42 CET --
On 14 March 2022, the management board of AKCIJU SABIEDRĪBA “ELKO GRUPA” registration number: 40003129564 (hereinafter – Issuer), approved the proposal to apply for the consent (waiver), in accordance with Clause 5.5 of the Terms of the Notes Issue dated 29 January 2021 (hereinafter – Terms of the Issue) governing the Notes with ISIN LV0000870079 issued by the Issuer (hereinafter – the Notes).
Description of the waiver
The Issuer hereby asks the Investors to grant their irrevocable and unconditional one-time consent of Clause 5.4.9. of the Terms of the Issue:
“To not sell, dissolve, liquidate any Material Subsidiary”
and allow the Issuer to alienate shares of two Material Subsidiaries in Russia:
1) ELKO Rus Ltd (ООО "ЭЛКО РУС")
Registration No.: 1175024024130
2) Limited Liability Company "Torgoviy Dom ABSOLUT" (Общество с ограниченной ответственностью "Торговый дом АБСОЛЮТ")
Registration No.: 1087746874852
Justification of the amendments
Since the beginning of the war in Ukraine, the Issuer has stopped deliveries of IT equipment and household appliances to the Russian market. Issuer respects and will continue to comply with all sanctions: partner-, product- and transaction-related. As a result of these sanctions, the supply chain and the movement of goods to Russia has been suspended and numerous global IT manufacturers from the Issuer’s portfolio have also announced a political decision to leave the Russian market. The presence in the Russian market, due to reputational risks, currently directly hinders the development of business in other markets.
Based on the above considerations the shareholders of the Issuer decided to divest Russian division of the Issuer and ask for Investors’ consent to carry out the alienation of shares of two Russian subsidiaries.
As a result of this transaction balance sheet of the Issuer will decrease due to divesting of Russian division balance sheet thus exposure to risks related to Russian market will decrease.
Therefore, planned transaction will have a positive effect to the Issuer in the following aspects:
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Better position for Investors as Issuer’s equity and interest service ratios will improve;
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Less leverage as Russian division funding will remain on its balance sheet and will not affect the Issuer;
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Less exposure to political risk attributed to Russian market;
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Russian ruble FX risk will be avoided and localized through divesting of Russian division;
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OPEX optimization in the remaining Issuer’s structure through cost cutting related to Russian division risk management.
NB! All other covenants of the Notes, incl. financial covenants, will remain unchanged and are not a subject of the consent.
In the light of the above arguments, the Issuer invites the Investors to support the proposed consent.
Voting procedure
The Investors must submit their duly completed and signed voting forms to the Issuer by 30 March 2022 (inclusive).
Application for receipt of the Investors’ consent and the voting form are attached hereto.
The Issuer has engaged Signet Bank AS to inform Investors about the proposed consent.
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