Foreign holders will have the chance to swap their holdings for GDRs (260 words)

Published: 10/3/2000

Aeroflot has announced that its Board of Directors approved a global depository receipts (GDR) issue on 20% of the airline in October or early November of this year. Aeroflot explained its decision to issue shares for 20% of the company as reflecting that it was believed that 20% was owned by foreigners who will swap their shares for the potentially more easily traded depository receipts. The airline still however, has to work out the procedures for such a transfer given that many of the foreign shareholders hold their shares through Russian trustees companies. According to Artem Dovlatov of Aeroflot, the goal of the issue is to increase the liquidity of Aeroflot's shares by listing them on a foreign exchange with the associated liquidity and clearing, while allowing a broader range of investors not previously directly involved in Russia to own them. The decision to establish a depositary programme goes back to 1997 when the company first reviewed the possibility of having a US level one ADR against 5% of the airline's equity. The Russian financial crisis however, delayed Aeroflot's plans, although the airline remained committed to the idea. According to a source in the company Aeroflot's decision to issue European GDRs instead of the originally planned ADRs comes from a problem with the issuer of the ADRs, the Bank of New York, who were reluctant to accept the lack of GAAP accounting from the airline.

Article ID: 2105