Flash Fixed Income Report /
Ukraine

Privatbank: Another step forward for senior bondholders

  • A London Court ruled that trustee will not incur additional liabilities by paying only some senior bondholders

  • The next step for PRBANK senior bondholders is to address the 'bail-in defence'

  • This case is both important and significant for senior bonds in general

Tolu Alamutu
Tolu Alamutu

Credit Research Analyst, Banks

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Tellimer Research
16 March 2020
Published byTellimer Research

Holders of Privatbank senior bonds are one step closer to repayment. On 16 March, the London High Court determined that the senior bondholder trustee would not incur additional liabilities by making payments to some (but not all) holders of the PRBANK 10.25% and PRBANK 10.875% securities. Hearings in the London High Court took place in late February, but the presiding judge decided to withhold judgement at that time.

As a reminder, the senior bondholder trustee was seeking direction regarding the award, which required that payment only be made to bondholders that are not linked to the former shareholders of Privatbank. According to the trustee, the award documentation also means that holders that purchased bonds after 14 June ‘may not have the same rights to repayment.’ Bondholders were previously asked to provide information to the trustee, which was passed to Privatbank’s lawyers.

The 16 March judgement means that based on the 'illegality defence' some bondholders are entitled to receive a payment of par plus accrued interest. The next step for PRBANK senior bondholders is to address the 'bail-in defence'. This defence requires that the bail-in of Privatbank bonds be recognised by the Bank of England. Like the illegality defence, this is being heard at the London Court of International Arbitration (LCIA). It is not yet clear how long it will take for a decision to be made.

As we have stated before, we see developments at Privatbank as both important and significant, for holders of senior bonds in general. If no award was granted, it would effectively have meant zero recovery on senior bonds of a bank classed as systemically important, which remains a going concern. Such a ruling may have had undesirable implications for Ukrainian banks looking to access foreign bond markets in the future. 

For more on Privatbank, please see the reports at the links below:

Privatbank: Good things come to those who wait

Privatbank: One small step for PRBANK, one giant leap for all senior bonds