CL-2021-000649 - [2025] EWHC 1333 (Comm)

A loan (“Loan 1”) was entered into on 9 March 2007 between VTBC as lender and JSC RusSpecialSteel (“RSS”) as borrower. RSS was the parent company of OJSC “Red October” Steel Works (“SWRO”), which was in turn the parent company of JSC VMZ Red October (“VMZ”), one of the Red October group companies. The loan amount was US$80 million. Loan 1 was 100% funded by VTB Russia pursuant to a participation agreement with VTBC dated 22 March 2007. RSS drew down approximately US$65 million under Loan 1 and the money was advanced by VTB Russia to VTBC and then to RSS.

A second loan (“Loan 2”) was entered into on 26 November 2007 between VMZ as borrower and VTBC, which is identified in the loan agreement as mandated lead arranger and bookrunner, original lender, facility agent and security agent. The loan amount was US$80 million, and the loan was drawn down in full. SWRO was the guarantor. Between 19 December 2007 and 29 February 2008, VTBC transferred or sub-participated its interest in Loan 2 to five other banks. From the end of February 2008, VTBC’s role in relation to Loan 2 was limited to that of “facility agent” and “security agent”. VTBC’s role was “solely mechanical and administrative in nature”.

It appears VTBC’s participation in the two loans is explained by the desire to make the loans subject to English law and jurisdiction.

The two loans went into default and attempts were made by the lenders to obtain recovery. The recovery efforts in relation to Loan 1 were managed by CJSC VTB Debt Centre, a separate legal entity based in Russia. Various claims were filed and VMZ entered bankruptcy supervision in November 2009 but no meaningful recoveries were ever made.