Ukraine’s finance ministry has injected UAH107bn ($4.1bn) into the equity of PrivatBank following its nationalisation on December 18, the country’s largest lender by assets said in a statement on January 4.
While the bank did not clarify, the injection is thought to be part of the UAH116.8 ($4.4bn) the government said it would inject into Privatbank, via domestic loan bonds with a maturity period of up to 15 years and an interest rate of up to 10.5%.
Meanwhile, analysts in Kyiv say the government has effectively written off up to UAH160bn the bank is owed by its former owners, Ukrainian oligarchs Ihor Kolomoisky and Hennady Boholyubov.
According to the bank’s latest statement, the positive results of its additional capitalisation, including through the issue of the currency-pegged loan bonds, will help it to provide liquidity for its currency-pegged liabilities.
PrivatBank also expects its ratings to be revised upwards to the sovereign level during the next revision by Fitch Ratings, which in late December downgraded the lender’s long-term foreign currency Issuer Default Rating (IDR) to ‘RD’ (Restricted Default) from ‘CCC’ and removed it from Rating Watch Evolving (RWE).
The government announced the nationalisation of the bank after its failure to fulfil a three-year recapitalisation programme. According to the National Bank of Ukraine (NBU), the hole in PrivatBank’s balance sheet as of early December stood at UAH148bn ($5.6bn), largely as a result of related party lending.
As well as issuing the state bonds, the national authorities plan to raise UAH32bn ($1.2bn) by converting related party loans and unsecured lending to the bank into its equity.
The finance ministry’s injection of UAH107bn into PrivatBank suggests the government expects no contribution to its equity from the bank's former owners, or no more than UAH10bn of the planned UAH76bn, analyst Alexander Paraschiy of the Concorde Capital brokerage in Kyiv wrote in a research note on January 5.
“In essence, the government has forgiven the former owners about UAH150-160bn that they owe to the bank, based on the National Bank of Ukraine estimates,” Paraschiy wrote.
Kolomoisky and Boholyubov are the “main winners” of the nationalisation, he added, while among all the bank’s creditors, “the only losers are non-affiliated Eurobond holders, which have lost so far 100% of their investment. In our view, they still have a good chance to recover their value, though such a recovery won’t be easy”.
On December 26, the NBU officially confirmed that no payments to nationalised PrivatBank bondholders will be made under each series of the lender’s Eurobonds. PrivatBank has three issues of Eurobonds maturing in 2018 ($375mn) and 2021 ($220mn).