Privatbank CEO comments on Eurobonds, Cargill loans

The New CEO of Privatbank (PRBANK), Oleksandr Shlapak, provided some comments on the bail-in of Eurobonds and some obligations to Cargill at his press conference on Feb. 2. He stated that the bail-in of Eurobonds was made by the “temporary administration of the bank together with the National Bank of Ukraine,” thus putting all the responsibility for the bail-in on the Deposit Guarantee Fund (the temporary administrator) and the central bank. “We agreed with the National Bank that we take the bank without these Eurobonds (on balance),” he said, as cited by Interfax-Ukraine.

He also stated that the bank’s obligations under Eurobonds and obligations to Cargill are “somewhat different.” He said that a “mistake happened” with the Cargill liabilities during the temporary administration, and “we corrected it as soon as we were able to.” He provided no information on the “difference” and the details of bail-in and recovery of liabilities to Cargill. 

Recall, the National Bank had recognized Privatbank insolvent and placed the bank under temporary administration on Dec. 19. The Deposit Guarantee Fund exchanged UAH 29.4 bln of the bank’s liabilities into shares (bailed in) and sold all the shares to Ukraine’s Finance Ministry for a symbolic price of UAH 1.0 on Dec. 21. The bailed in obligations included Eurobonds with an outstanding amount of USD 555 mln, some liabilities to related parties, and possibly some liabilities to Cargill. On Jan. 26, Privatbank said that all of the Cargill accounts had been restored.

Alexander Paraschiy: If some of the obligations of the bank to Cargill were bailed in, there should be no easy way to restore them, in our view. According to procedure, the bailed-in obligations were exchanged for new shares of Privatbank (afterwards registered by State Security Commission). Thus, the recovery of liabilities to Cargill should lead to a decrease of the bank’s share capital. From Shlapak’s words it’s clear that the Finance Ministry took the bank without obligations to Cargill (as well as without obligations to Eurobond holders). If such obligations no longer existed, we wonder how the new management of the bank could “restore” them. In our view, such move is a serious abuse of authority by the new top management of state bank. And, of course, it looks like a valuable precedent for the holders of Eurobonds.