Some Privatbank bondholders to get payments on bailed-in bonds

Privatbank’s senior Eurobonds (PRBANK) maturing in
2018 are likely to be recovered on behalf of some bondholders, according to a
July 22 statement from the bond’s trustee, Madison Pacific. The statement
referred to a decision by the London Court of International Arbitration, which
remains confidential, that payments on the bonds could be made “to some, but
not all” bondholders. The trustee reported that the highest chance for
repayment belongs to the bondholders who acquired their bonds before June 14,
2019 and will identify themselves by Aug. 13, 2019 by providing information to
the trustee. Such information will be passed to Privatbank’s legal adviser.

Recall, all the Eurobonds of Privatbank (including two
senior issues for USD 335 mln maturing in January and February 2018) were
bailed in during the nationalization process in December 2016. Before that, the
bank was recognized insolvent. Since that time, the Ukrainian government has
contributed UAH 155.3 bln for the bank’s bailout. In November 2017, Madison
Pacific Trust, on behalf of the holders of Privatbank’s 2018 bonds, initiated a
hearing in London to demand recovery of the bailed-in bonds.

Alexander Paraschiy: This
announcement is encouraging for the bondholders who suffered from the 2016
bail-in and have remained holders of the bonds since then. It’s also positive
for the bank’s other Eurobonds, the subordinated notes for USD 220 mln maturing
in 2021, as it increases the chance that they will be also recovered (so far,
no court hearing in London has been initiated to recover them).

From the provided information, we can conclude that
Privatbank will try to avoid payments on the bonds to some of the bondholders,
especially those whom it will be able to identify as entities related to the
former shareholders of Privatbank. In this way, the bank will try to minimize
the costs related to the bonds’ repayment.

At this moment, it is hard to determine how much
the 2018 bondholders will be repaid, e.g. whether they will be compensated any
interest since late 2016. It is also not clear what power the bank’s legal
advisers were granted by the court, e.g. for how long will they study the
documents from bondholders, what arguments they are allowed to use to refuse
repayment on the bonds, and for how long the bank can postpone the repayment.