Privatbank bondholders appeal against bail-in in UK court

Some holders of Privatbank Eurobonds (PRBANK) have initiated a hearing in London Court of International Arbitration against the bail-in of their bonds during the bank’s nationalization, Interfax-Ukraine reported on May 18 citing Ukrainian lawyer Viktor Moroz. He said the bondholders will insist that their rights were violated during the bail-in procedure. The proceedings are at the stage of conciliation of the arbitration procedure and the selection of arbitrators, he said.

Privatbank was declared insolvent and put under the temporary management of the State Deposit Guarantee Fund on Dec. 19. The Fund decided to bail-in all holders of Eurobonds of the bank on Dec. 21. Their notes were exchanged into new bank shares. On the same day, the Fund sold 100% of the bank’s shares to the Finance Ministry for UAH 1.0. In this way, the creditors were fully diluted.

Alexander Paraschiy: It looks like the initiators of the hearing do not represent the majority of Privatbank bondholders – for example, a trustee of two PRBANK notes of a total par value USD 335 mln, Deutsche Trustee, did little to question the bail-in, and now is trying to resign. If the trustee is changed successfully in June or July, we can expect another, broader legal hearing against the bail-in. So far, it is hard to estimate the chance of the bondholders’ success in any court battle, taking into account that according to Ukrainian legislation, neither Privatbank nor any state body has any obligations to the bank’s bondholders. So far, it looks like an out-of court resolution of this case would be more efficient for both the bondholders and the Ukrainian government.