Privatbank CEO says he intends to reach agreement with bondholders

At his first press conference on Dec. 22, Privatbank’s newly appointed CEO Oleksandr Shlapak confirmed that all the bank’s Eurobonds were converted into equity as part of a bail-in. “For some reason, Eurobonds were included into the list of financial instruments that were converted into equity,” he said. “Together with the National Bank, we will try to find common ground with the Eurobond holders. If not, then we will prove our case in court.”

Ukraine’s State Deposit Guarantee Fund managed to bail in only UAH 29.4 bln of Privatbank liabilities before the bank was nationalized, NBU Head Valeria Gontareva told a local radio on Dec. 22. According to initial plan designed by the NBU, UAH 32 bln of Privatbank liabilities were subject to a bail-in, she said. “That suggests about UAH 2.6 bln of funds (of related parties) were withdrawn from the bank in recent days,” Gontareva concluded.

Recall, under the plan outlined by the NBU on Dec. 19, the Fund was going to convert UAH 31.2 bln of Privatbank liabilities (to related parties and Eurobond holders) into the bank’s shares, as part of the bank’s nationalization plan. Further on, all the bank’s shares were sold to Ukraine’s Finance Ministry for UAH 1. This task was completed on Dec. 21, according to the announcement of the Fund and the ministry.

On the same day, the ex-management of Privatbank published its own version of the bank’s nationalization, explaining that the tough rules implemented by the NBU in recent years, unfair treatment to the bank by the regulator and information attack initiated by the NBU head were the reasons for the bank’s failure.

Alexander Paraschiy: It’s good that on the fourth day of the bank’s nationalization program, somebody finally mentioned the Eurobond holders. To our knowledge, neither the bank nor the government informed the bondholders on what is going on. In our view, neither of the parties involved in the bank’s nationalization program is willing to take responsibility for the full dilution of Eurobond holders. This fact, as well as the bail-in violating the equal treatment approach of Privatbank lenders, causes us to expect that the recovery rate of PRBANK Eurobonds will be more than zero.

A clear motive for the government to seek a mutual beneficial solution with bondholders is that the government is afraid of spoiling its relationship with private international creditors. Firstly, the MinFin is still expecting to place some market Eurobonds in the short- or mid-term future. Secondly, the government might be willing to secure support from international investors in its inevitable information and legal war against the former owners of Privatbank.