Ukraine’s troubled Privatbank, the country’s largest lender by assets, intends by August 2017 to entirely repay its refinancing loans, now valued at the hryvnia equivalent of almost $1.2bn, according to its 2015 IFRS financial statement and an independent auditor's report provided to bne IntelliNews.
The rescheduled repayment plan brokered with the central bank will shore up confidence in Privatbank, owned by Ukrainian oligarchs Ihor Kolomoisky and Hennady Boholyubov, after Finance Minister Oleksandr Danylyuk said in May that the lender is dogged by “systemic problems” and has been “very creative” in bypassing financial regulations.
According to the documents seen by bne IntelliNews, in February and March Privatbank agreed with the National Bank of Ukraine (NBU) additional terms for restructuring the NBU refinancing loans. The bank began repaying UAH650mn ($26.2mn) in monthly instalments from March under the new schedule, with gradually increasing amounts to clear the loans by August 2017.
In 2015, the total amount of hryvnia-denominated refinancing loans from the NBU received by Privatbank stood at UAH9.7bn ($390mn at the current exchange rate), while in 2014 they totalled UAH19.889bn ($800mn), amounting to $1.19bn overall. The bank will also have to pay interest on the sum owed.
According to the restructuring plan agreed with the NBU, Privatbank is bound to the following requirements: to further increase its share capital; repossess collateral by April 1, 2016; gradually decrease the share of loans issued to related parties and insiders of the bank; obtain additional collateral for a significant part of loans by September 1, 2016; gradually repay overdue principal and interest on the NBU refinancing loans by August 2017; and provide additional collateral for the NBU’s refinancing loans in the form required by the regulator.
In addition, major shareholder Kolomoisky provided a personal guarantee confirming the lender’s ability to follow the restructuring plan. Kolomoisky and his co-owner of Privatbank, Boholyubov, also control a business empire (Privat Group) encompassing oil and fuel, metals and mining, aviation, and media. Many of these businesses are based in the region of Dnipropetrovsk where Privatbank is headquartered.
Kolomoisky has seen his relationship with Ukrainian President Petro Poroshenko nosedive in the past year amid political differences, but the president has tried to offset concerns about Privatbank in recent months, given its huge importance for the country’s financial wellbeing.
Poroshenko said in early June that he saw no threats to the functioning of the lender and that the bank “has adequate liquidity”. He added that the issue of Privatbank is the subject of ongoing talks with the country’s main donor, the International Monetary Fund (IMF).
This followed the NBU’s announcement in May that it had agreed a three-year recapitalisation plan with Privatbank, which the regulator said was engaged in “vigorous efforts” to ensure its implementation. The plan included the restructuring of the refinancing loans, measures to improve the quality of the bank’s loan portfolio, including through the acceptance of additional collateral against loans. Privatbank will also increase its capital through additional contributions by shareholders and the conversion of subordinated debt into Tier 1 capital.
The bank’s liquidity position is currently satisfactory, the NBU added at the time. Privatbank maintains the largest cash balances in cash desks and ATMs across the Ukrainian banking system, amounting to UAH9bn ($356.6mn), while UAH2.3bn is held in the bank’s correspondent account.
During January-June this year, the bank repaid on time all interest due on refinancing loans from the NBU and principal according to the newly agreed schedule in the amount of UAH5.64bn ($227.2mn).
“[Privatbank’s] management believes that given all the actions they are taking, as described above, the Group will be able throughout at least next 12 months to follow the restructuring plan, comply with the regulatory requirements of the countries where the group operates, sustain its customer base and manage its liquidity gap,” said the NBU’s May 23 statement.