Ukrainian oligarchs Ihor Kolomoisky and Gennadiy Bogolyubov, both former owners of PrivatBank, the largest bank in Ukraine, which was nationalized in December, have failed to meet a deadline to restructure the bank’s loans.
The bank is plagued by unpaid insider loans that have left a hole of at least $3.39 billion in its ledger, the National Bank of Ukraine (NBU) reported on Dec. 13.
PrivatBank, however, claims that its insider loan portfolio amounts to only 10 percent of its overall lending, and that the bank was on schedule to recapitalize the institution to meet central bank requirements.
The deadline to restructure the loans elapsed on July 1, the Finance Ministry of Ukraine, now the 100-percent owner of PrivatBank, said in a statement on July 2.
The NBU will now start the procedure of debt enforcement, the central bank says, while revealing no details.
“We cannot reveal details of the strategy, but can say that it will be a regular procedure of debt enforcement,” read an NBU message published on its website on July 3.
But the problems of PrivatBank’s former management don’t stop with its overdue loans.
The Ukrainska Pravda news website has obtained a statement from Oleksandr Shlapak, the CEO of PrivatBank, appointed after the nationalization, submitted to the Prosecutor’s General Office of Ukraine, in which he claims that ex-managers of PrivatBank were involved in providing illegal loans to PrivatBank-connected institutions.
The statement reads that on Dec. 15 and Dec. 16, the same day Kolomoisky and Bogolyubov submitted an official letter to the Cabinet of Ministers with an appeal to nationalize the bank, the ex-management of PrivatBank signed a deal with a company registered in the British Virgin Islands, Claresholm Marketing Ltd., which was later proved to be related to PrivatBank, on the provision to it of loans of $389 million and 60 million euros. The loans were later included in the bank’s financial statements.
The Prosecutor’s General Office of Ukraine, together with the National Anti-Corruption Bureau and the Special Anti-Corruption Prosecutor’s Office, has opened several pre-trial criminal investigations connected to PrivatBank and its officials, Prosecutor General Yuriy Lutsenko told Ukrainska Pravda on July 3.
Ask for nationalization, then sue
The Ukrainian government acquired a 100-percent stake in PrivatBank from Kolomoisky and Bogolyubov on Dec. 18, after the Cabinet of Ministers approved an NBU request that Ukraine’s largest deposit holder be placed under temporary administration. Then it started the procedure of nationalization.
On Dec. 21, the Deposit Guarantee Fund of Ukraine reported that the government had bought PrivatBank for one hryvnia. The transaction took 72 hours.
The Finance Ministry has said that the nationalization was a necessary step to save the institution and to maintain Ukraine’s financial and economic stability. It said the collapse of the country’s biggest bank, in which more than 20 million Ukrainians had deposits, and which services 60 percent of all electronic payments in the country, could have caused the destabilization of the country’s financial system.
“Considering all the risks and guarantees of financial compensation that the government got from the ex-owners (Kolomoisky and Bogolyubov), it was decided to nationalize PrivatBank,” the ministry said.
Kolomoisky didn’t respond to a request for comment. His partner Bogolyubov wasn’t available for comment.
But in May and June, the Cyprus-registered company Triantal Investments, which owned 16.7 percent of PrivatBank’s shares before nationalization and belonged to Kolomoisky, filed several lawsuits against the NBU, Finance Ministry and PrivatBank requesting that they “cancel their illegal decisions.” The public versions of the lawsuits revealed no details.
However, Kateryna Rozhkova, the deputy head of the NBU, said in an interview with the Finbalance news website on June 22 that Kolomoisky had in the lawsuits claimed that the nationalization of PrivatBank had been illegal, and was in effect a case of corporate raiding by the state.
The Finance Ministry on July 2 published a scan of a letter that appears to contradict that, however.
In the letter, sent to Ukrainian Prime Minister Volodymyr Groysman on Dec. 16, Kolomoisky and Bogolyubov ask the government to nationalize PrivatBank.
“Considering the importance of the bank to the financial system of the state, we kindly ask you to make a positive decision for the state to purchase PrivatBank, and to further capitalize it,” reads the letter, which was signed by Kolomoisky and Bogolyubov.
In return, the oligarchs took on obligations to ensure that those companies that had taken loans from PrivatBank before nationalization would restructure them before July 1. The possibility was offered to prolong the term until January 2018 – but only if 75 percent of the total loan sum was repaid by July 1.
The ministry has reported that it has seen no progress in the restructuring of the loans, and has seen only “a campaign to discredit (the state) in the media.”
