Ukraine reports Privatbank nationalization completed

Ukraine’s Finance Ministry has completed the purchase of the nation’s leading private financial institution, Privatbank (PRBANK), from the State Deposit Guarantee Fund for UAH 1, government agencies reported on Dec. 21. Before selling Privatbank, the Fund provisioned its loan portfolio and issued some additional shares to partially cover the resulting capital gap. The resulting capital of the bank was still negative, which, by law, allowed MinFin to purchase 100% of the bank’s shares for UAH 1. The nationalization “has become a guarantee of the bank’s further capitalization, which will happen soon,” MinFin commented.

Neither MinFin nor the Fund provided any numbers on the bank’s capital increase, provisions and resulting capital.

Recall, the initial plan of the bank’s bailout, as announced by Ukraine’s central bank on Dec. 19, looked like this: 1) the Fund raises the bank’s share capital by about UAH 31.2 bln by bailing in Eurobond holders and related depositors, 2) the Fund sells all the bank’s shares to MinFin for UAH 1; and 3) MinFin increases the bank’s share capital by about UAH 43 bln by the end of this week.

Alexander Paraschiy: It’s a big disappointment that the government agencies involved in the Privatbank bailout provided no updated numbers about the bank in the three days after it was declared insolvent. That may indicate a lack of professionalism (by not being able to agree upon the exact numbers) or they fear revealing the reality (which might have been much worse than they expected). In any case, this indicates a lack of intellectual capacity of the government to run such a complicated project. That’s the very aspect to the situation that, based on our previous expectations, should have held the government back from the bank’s nationalization.

The only updated number we have is UAH 29.4 bln of the bank’s capital increase as of yesterday, as reported by the Interfax-Ukraine news agency. There is no official information on whether this capital increase was performed at the expense of holders of Privatbank Eurobonds maturing in 2018 (at a total value of about UAH 8.8 bln). But most likely it was so. That means the full dilution of all of Privtbank’s Eurobonds has already occurred.