Ferrexpo subsidiaries seek recognition as non-related to F&C Bank
16 January 2017
The Ukrainian subsidiaries of iron ore miner Ferrexpo (FXPO LN, FXPOLN) are in varying stages of legal battles in which they are demanding to be recognized as non-related parties to Finance & Credit Bank, which failed in September 2015, finbalance.com.ua reported on Jan. 16, citing court documents. The total amount of deposits under question is UAH 4.26 bln (or USD 154 mln at the current exchange rate).
Based on the disclosed documents, Ferrexpo’s Poltava Mine claims the bank owes it UAH 3.92 bln, which it said should be classified as the bank’s liabilities to non-related parties. On Dec. 26, 2016, the Kyiv Economic Court ruled to convene additional investigations in Poltava Mine’s claims.
Ferrexpo’s Yeristovo Mine is currently suing for recognition of UAH 292 mln as non-related liabilities of Finance & Credit Bank. After losing in the Kyiv Economic Court, it won an appeal in Kyiv Appellate Economic Court. Another asset of Ferrexpo, Bilanivskiy Mine, lost a similar case in Kyiv Economic Court for a UAH 52.6 mln deposit in late December.
Recall, Ferrexpo held USD 174 mln in deposits in Finance & Credit Bank the day before it was recognized insolvent. At the time, Kostyantyn Zhevago was the majority shareholder of both Finance & Credit Bank and Ferrexpo. Following the bank’s failure, subsidiaries of Ferrexpo were recognized as related party depositors.
Related party depositors are ninth out of ten in the queue of creditors who are eligible to recover their money from the bank (before providers of subordinated loans). Should they be not related parties, they would fall into the seventh group in the queue, with a better chance of recovering their deposits.
Alexander Paraschiy: Despite Ferrexpo subsidiaries being related parties of F&C Bank, Ukrainian courts could rule differently, offering them some chance to recover some of their stuck deposits.
Thus far, we are not seriously considering such an outcome, not only due to uncertainties regarding the legal battles. There is also uncertainty as to whether any funds will remain for the creditors of the seventh round.
