Privatbank Eurobond issuer initiates arbitration hearing against bail in

Madison Pacific Trust Limited, a newly appointed trustee
of Privatbank (PRBANK) senior Eurobonds, submitted requests for arbitration
against the bank to the London Court of International Arbitration on Nov. 8,
according to its Nov. 10 stock exchange notice. The court claims “are in
relation to loan agreements” between the bank and U.K. SPV Credit Finance PLC,
the issuer of all the bank’s Eurobonds. The notice does not specify the reasons
for the litigation, but we can conclude the new trustee initiated it against
the bail in of Privatbank’s Eurobonds made in December 2016.

Recall that all the bank’s Eurobonds were exchanged
into new shares (bailed-in) in late December 2016 as part of the bank’s bailout
and nationalization. The bailout cost UAH 29.4 mln to the bank’s creditors
(mostly Eurobond holders) and related party depositors and so far UAH 139.3 bln
to the Ukrainian government.

Alexander Paraschiy: This is a logical step after the trustee filed a notice requesting to accelerate Eurobond
repayment on Nov. 2. In our view,
the Ukrainian government has made many procedural mistakes under Ukrainian
legislation during the bail in, so the full recovery of the bank’s senior bonds
is just a matter of time. So far, it is hard to say how much time it will take
to complete international litigation (it took more than ten months to start it,
which is much more than we expected), as well as recover the bonds in the event
their holders win the case. Anyway, we continue to see value in PRBANK senior
bonds.