In December of 2016, the Ukrainian Cabinet ruled to nationalize PrivatBank, Ukraine’s largest privately owned commercial bank, causing the Bank’s Eurobond holders to lose 100% of the value of their investments.
The decision, however, was made back in 2015 between the National Bank of Ukraine (NBU) and the International Monetary Fund (IMF), who chose to place the lion’s share of the bailout burden on the Bank’s Eurobond holders to fill the capital gap in PrivatBank’s balance.
Due to that 2015 decision by the NBU and IMF, there was little to no chance of Eurobond holders to recover their bond’s value, as they were completely unable to reduce their exposure to the Bank’s bonds.
In the summer of 2015, the NBU forced the Bank to extend Eurobonds that were due in September 2015 and February 2016. These notes would have had the highest recovery rate, yet Eurobond holders agreed to the restructuring as they were mislead about the Bank’s current risks.
During this time, in July 2015, the legislative amendment that outlined the bail-in process of the Eurobond holders was approved to little concern of the public or the bondholders themselves.
The NBU then concealed vital information from the Eurobond holders about the Bank’s financial situation. In the NBU’s May 23 press release, when we now know that PrivatBank was not meeting its liquidity requirements, the NBU stated that the Bank’s position was “satisfactory” as to not raise any suspicion.
The NBU also failed to mention that the Bank had delayed fulfilling the recapitalization program, leaving a 46% capital gap on the Bank’s balance sheet.
Unbelievably, during the week in December when PrivatBank was nationalized, the NBU did not even contact the Eurobond holders to explain what was going to happen to their investments.
These actions by the NBU and IMF reveal deliberate withholding of information from the Eurobond holders, who should demand satisfaction of their rights.
While Ukrainian law protects the Government, supported by the NBU and IMF, Eurobond holders have the right to appeal their case to the international investment community.
Bondholders should raise their case immediately, if they want to stand any chance of recovering their lost investments from the NBU.
Read the full financial report at Concorde Capital.