Flash Fixed Income Report /

Privatbank: A win for the bank. Now what?

    Tolu Alamutu
    Tolu Alamutu

    Credit Research Analyst, Banks

    Tellimer Research
    15 October 2019
    Published by

    What has happened?

    On 15 October, the English Court of Appeal confirmed that the English court has jurisdiction to hear Privatbank’s case against its former shareholders, Igor Kolomoisky and Gennadiy Bogolyubov. This decision overturns a previous judgement by an English court, which resulted in an end to a worldwide freezing order on assets of the bank’s former owners. That freezing order has now been reinstated. Privatbank will now seek to recover US$1.9bn (excluding interest) from the former shareholders. A date for the trial has not been set. However, according to lawyers for Privatbank, defendants have been refused the right to appeal the 15 October decision, and have been given until the end of November to file defences.

    Our view

    We continue to believe that bond-specific cases have much clearer implications for senior bondholders than any others. We acknowledge that if Privatbank does secure a win against the former shareholders of the bank in the fraud and conspiracy claims, this may be seen as positive for Ukraine risk in general. Added to this, it is possible to argue that this case may have implications for the directions application hearing. As a reminder, the Trustee is seeking direction from the English courts on paying some bondholders and not others, as under the terms of the award granted by the London Court of Arbitration (LCIA), payment is restricted to bonds which are not held by the former shareholders of PRBANK and their beneficiaries, or by certain entities. Having said this, it is not clear that Privatbank will resolve its claim against the former shareholders of the bank before the directions application hearing, which is scheduled to hold in February next year. Further, there are other pending cases involving the bank, Ukraine’s authorities and the former shareholders in other jurisdictions, including Ukraine and the US.