Thu. Jul 7th, 2022


HSBC has finally processed the delayed interest payment on debt owed by Holland & Barrett, the UK high street retailer with links to sanctioned Russian oligarchs.

The bank had refused to approve the payment because of concerns over the status of LetterOne, the London investment group that owns the retailer, in a strong example of how western sanctions following the invasion of Ukraine have sowed uncertainty across markets.

LetterOne is majority owned by sanctioned Russian oligarchs, including Mikhail Fridman and Petr Avenalthough it has been given assurances from authorities in the UK and EU that it does not fall under sanctions itself.

However, HSBC sought extra comfort from regulatory authorities before making the payment of interest on the € 415mn loan to Holland & Barrett’s creditors, which meant the debt was not covered in time to meet the deadline for payment.

LetterOne paid its interest last week, but the hold-up meant it breached the end of the “grace period” this week in which borrowers are typically given time to pay.

The value of the Holland & Barrett’s loans have fallen sharply since the Financial Times first reported the issues with the retailer’s interest payment, leading some distressed debt investors to start taking stakes in the hope they could try to gain control of the company.

The difficulties in paying the debt show how complicated the sanctions regime is in working out which related entities might fall under the regime, and also how cautious financial services companies are when dealing with any Russian-linked entities.

Russian companies have faced similar issues, with steelmaker Severstal last week unable to pay a coupon to a bondholder after Citigroup blocked the payment. Severstal is not under any restrictions, but its majority owner, oligarch Alexei Mordashov, has been sanctioned by the UK and the EU.

Barclays, another bank involved in the transaction, had already approved the Holland & Barrett payment, while a similar sterling-denominated loan was paid last week without issue.

HSBC was given the further reassurances it required from French and UK authorities on Thursday morning, two people familiar with the matter said, which meant it could finally clear the payment.

LetterOne said: “Holland & Barrett and LetterOne have been advised that HSBC, having received the payment of [euros] interest from Holland & Barrett on March 29, has made the payment to all lenders on March 31. Holland & Barrett is in full compliance with all its obligations to its lenders. ”

He added that LetterOne and Holland & Barrett were not subject to sanctions and have had confirmation of this from authorities in the UK and Luxembourg.

One of Holland & Barrett’s lenders confirmed to the Financial Times they had received payment of the coupon on Thursday.

HSBC declined to comment.



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