Ukraine court orders Privtabank to service some bailed-in deposits

A Kyiv court satisfied the appeal of six British companies that demanded Privatbank (PRBANK) and its subsidiaries should “properly perform deposit agreements” with these companies, finbalance.com.ua reported on Feb. 24 citing the court’s ruling of Feb. 09. The court ordered the bank to accrue and pay interest under the agreements, prohibited the bank from stopping or blocking the use of the companies’ accounts opened in the bank, as well as prohibted the bank from freely using the money from their accounts to make any payments, including share purchases.

The six companies, registered under the same address in Enfield, UK, are very likely to have been recognized as related parties of Privatbank. So, their deposit accounts seem to have bailed-in during the bank’s nationalization in late December. Recall, after the bank was recognized insolvent on Dec. 19, the temporary administrator converted UAH 29.4 bln of the bank’s liabilities (including the bank’s Eurobonds and related parties’ deposits) into the bank’s shares. Later on, Ukraine’s Finance Ministry bought all the shares of Privatbank from the temporary administrator for a symbolic price of UAH 1.

Alexander Paraschiy: The decision of the court will be very likely appealed, and this court case may last for a long time. Also, it’s not clear how the bank may implement this court ruling if the accounts of the six British companies were written down, in full accordance with Ukrainian legislation. In any case, the ruling shows that the legal position of the Ukrainian government in the bail-in case is not so strong. We expect that the companies mentioned above will continue to attack through Ukrainian courts, and some of the courts will make decision in their favor. All this looks encouraging for holders of Privatbank’s Eurobonds.