Oracle has agreed to buy out its firm's debts in Russia

Oracle's readiness to buy out the debt to Russian creditors was announced by the company's representative Artem Antonov on Wednesday, November 6, during one of the COURT hearings, an RBC correspondent reports. "A little over a week ago, on behalf of Oracle Corp., we sent letters to all creditors with an offer to buy out the debt. All those years, while the courts were going on, Oracle [was trying to get] a license from US regulatory authorities that the company could pay off debts, and now it has finally received it. Without such a license, Oracle could not interact with Russian creditors in any way because of the sanctions," the lawyer said.

RBC has reviewed the text of the letter. It follows from it that the company is ready to buy out the claims against its Russian subsidiary Oracle Computer Equipment for no more than 60% of the par value. The condition of the deal is that the creditors waive any new claims against the Russian legal entity. The total amount of debt to all creditors is more than 1.4 billion rubles, i.e. we may be talking about 840 million rubles, or $8.5 million at the current exchange rate.

In the letter, Oracle states that "permission to buy out part of the debt was obtained following several months of interaction with the regulator." At the same time, it is stated that, according to the issued permission, the maximum amount, like other conditions, cannot change. "The company proposes to settle the debts by buying out claims from creditors. For regulatory reasons and taking into account the position of foreign consultants, the company currently considers other options (including the option of concluding a settlement agreement under the bankruptcy law) unavailable," the letter says, with the caveat that "there is a possibility" that the option of a settlement agreement may become available in the future.

An RBC source familiar with the case explained that Oracle's letter may be about obtaining a license from the US Office of Foreign Assets Control (OFAC, a division of the US Treasury Department responsible for enforcement in the area of ​​sanctions). This is the country's only regulator that can issue such documents, the source noted.

The fact of receiving a letter from Oracle was confirmed to RBC by sources in four creditor companies, as well as the bankruptcy trustee for Oracle Computer Equipment, Yegor Nepomnyashchikh. According to him, the letter raised many questions: how exactly the debts will be repaid, how Oracle plans to pay off state structures that are creditors of its subsidiary, for example, the Federal Tax Service. At the same time, Nepomnyashchikh noted that Oracle's letter is not legally significant, since it does not indicate the sender and there is no signature. According to him, the creditors sent clarifying questions to the company and are waiting for clarification. Nepomnyashchikh could not say whether Oracle's proposal will affect the bankruptcy procedure of the Russian subsidiary, noting that this depends on the further actions of the parent company.

Oracle declined to comment.

Oracle offers cloud solutions in the areas of business analytics, hybrid clouds, machine learning, and data storage. The Russian division of the company was engaged in software development and technical support. Its clients included the Federal Tax Service, the Treasury, the Ministry of Finance , the Ministry of Transport, the Federal Customs Service, the Social Insurance Fund, the Central Bank , etc.

In March 2022, Oracle suspended its operations in Russia, and in June of the same year, the IT company Krok filed a bankruptcy claim against Oracle Computer Equipment. The court declared the legal entity bankrupt in August 2023, after which bankruptcy proceedings began. Its creditors include the IT company Force — Development Center with a debt of 440 million rubles, distributor Marvel Distribution (425.2 million rubles), Alfa-Bank (99.4 million rubles), Sberbank (77.2 million rubles), MegaFon (44 million rubles), Infosystems Jet (20 million rubles), etc.

An RBC source familiar with the progress of the case reported in October that only 82.8 million rubles had been collected for the bankruptcy estate so far. Of this, 43.1 million rubles were paid by the Interdistrict Inspectorate of the Federal Tax Service of Russia No. 51 in Moscow following a claim filed by Yegor Nepomnyashchikh. In total, he presented claims to various organizations for more than 533 million rubles, including 191.7 million rubles to Sberbank, 149.4 million rubles to Force — Development Center. Some companies do not agree with the demands of the bankruptcy trustee; legal proceedings are currently underway between them. It follows from the inventory document that as of October 24, the Russian division of Oracle has property worth 1.6 million rubles.

Also in August 2024, Yegor Nepomnyashchikh filed lawsuits for the return of bonuses to 51 former Oracle employees. The total amount of claims is more than 100 million rubles. In mid-September, former employees appealed to the authorities, including Russian President Vladimir Putin, with a request to protect their interests and preserve the payments they received from Oracle in 2022. In their letters, they claimed that the bankruptcy trustee was trying to shift responsibility for the curtailment of Oracle's operations in Russia onto dismissed employees, demanding the return of salaries and severance pay. The authors of the letter recalled that from January 2020 to June 2022, Oracle withdrew 15.08 billion rubles from Russia instead of paying off creditors.

Roman Kuzmin, an adviser to the Pen & Paper Bar Association, noted that Oracle's creditors in Russia include companies that have fallen under blocking sanctions from the United States, such as MegaFon, Sberbank, Alfa Bank, as well as government agencies and state-owned companies. "The parent company of Oracle, as a person under US jurisdiction, was prohibited from providing economic benefits to sanctioned persons, so it was necessary to obtain a special license from OFAC," Kuzmin noted. He called the debt buyout "the most understandable and simple" option for the American regulator: "This approach allows OFAC to control the demands of sanctioned creditors, the provision of funds to them, including indirectly, and also ensures the accountability of such payments and their receipt into a frozen account."

The lawyer recalled that the bankruptcy proceedings in Oracle Computer Equipment should be completed on December 3 of this year. But he believes that, given that a number of transactions are still being challenged, the deadline will be extended for another six months. "If we assume that the parent company acquires the rights of claim of all creditors, then it will have to go to court with applications for procedural succession for each right of claim. If the applications are satisfied, Oracle will acquire the procedural status of creditors in the bankruptcy case, after which two options are possible: either continuation of the bankruptcy proceedings, as a result of which the property will be sold, and the funds received will go to the parent company, or it will be proposed to conclude a settlement agreement," Kuzmin reasons, stipulating that third-party creditors may potentially object to the settlement, citing the fact that the decision was actually made unilaterally by a creditor affiliated with the debtor. At the same time, Roman Kuzmin called the second option more expected. “If the terms of the settlement agreement are fair, it is unlikely that such a position of third-party creditors will hold up in court,” he reasons.

Briefcase Law Office Managing Partner Evgeny Kryukov pointed out that the practice of selling a bankrupt company's debt at a significant discount is very common. "Globally, there are two ways to restore the debtor's solvency and exit the bankruptcy procedure: concluding a settlement agreement or buying out the claims of independent creditors to a controlled entity and then declaring a waiver of the claims. Oracle decided to go the route of buying claims, and this is obviously a simpler scenario: there is no need to approve a settlement agreement at a meeting of creditors, take into account the opinion of minority creditors who refused," he reasons. Kryukov called the situation itself, when a foreign parent company is looking for a way to resolve such a dispute, "extremely rare." According to him, as a rule, they prefer to "forget" about Russian subsidiaries with debts.