Oschadbank loses appeal to claim 93% of Ukrtelecom shares

The Kyiv Appellate Economic Court rejected the appeal
filed by Ukraine’s  State Savings Bank (Oschadbank, OSCHAD) demanding
foreclosure on 92.79% of the shares of Ukrtelecom (UTLM UK), the finbalance.com.ua
news site reported on June 18. The 92.79% stake was placed as collateral for
UAH 2 bln in local bonds issued by ESU (the owner of the contested stake) and
purchased by Oschadbank in 2013. In March 2017, when the bonds matured,
Ukrtelecom and ESU failed to redeem them, which forced the bank to initiate the
foreclosure.

In March 2018, the Kyiv Economic Court denied
Oschadbank’s foreclosure request, referring to rulings of the same courts made
in late 2017 that stipulated the return of the 92.79% Ukrtelecom stake
from ESU to Ukraine’s State Property Fund. In this way, the
collateral that Oschadbank is trying to recover does not belong to ESU any
more, but is property of the Ukrainian government.

Alexander Paraschiy: As we highlighted before, the return
of Ukrtelecom from the hands of Rinat Akhmetov, who controls ESU, to the state
may have negative consequences for Ukrainian state banks Oschadbank and
Ukreximbank (EXIMUK), which hold jointly over UAH 4.2 bln in ESU debt. With
Ukrtelecom’s return to state hands, we don’t believe the banks will be able to
recover the loans.

This won’t harm the banks’ liquidity much, as the loans
are being rescheduled starting from April 2013, the date of their initial
maturity. But this may be used by the banks as a reason to demand from the
government another capital increase. In this way, these banks could benefit,
but at the expense of the state budget.