Relevant Document:NBU April 18 Notice
Kiev’s District Administrative Court has ruled in favor of PrivatBank’s former shareholder, Igor Kolomoisky, in the first instance by declaring the regulators’ 2016 decision to nationalize PrivatBank unlawful, the National Bank of Ukraine, or NBU, said in a statement. The NBU is preparing an appeal.
Today “the District Administrative Court ruled that the procedure whereby the state participates in resolving the insolvent CB PrivatBank PJSC was out of compliance with applicable laws,” the NBU said.
“The court ruling has yet to come into effect and will be appealed by the NBU. We will continue to prove to the court of appeal that the regulator’s decisions and actions were lawful. We have reiterated on multiple occasions that the legal uncertainty driven by court rulings undermines financial stability,” said Viktor Hryhorchuk, Head of Litigation at the NBU Legal Department.
The NBU said it will propose to the Financial Stability Board to appeal to the National Security and Defense Council of Ukraine and the Cabinet of Ministers of Ukraine and bring to their attention that “such lawsuits deal irreversible damage to Ukraine’s international image.”
NBU First Deputy Governor Kateryna Rozhkova commented that “The decision to implement the government-assisted resolution of the insolvent PrivatBank was made in accordance with applicable law and supported by the National Security and Defense Council of Ukraine and the government of Ukraine with the aim to deliver financial stability and to safeguard the funds of the public. The legality of this decision is obvious, and there are no legal or economic grounds to reverse it. After the insolvent bank was resolved in a government-assisted procedure, the bank migrated fully to a market-driven business model and is now Ukraine’s most profitable bank and a part of the stable and transparent banking system,” she said.
In a
separate case in Kiev’s Economic Court, the next hearing between Kolomoisky and PrivatBank regarding the reversal of the 2016 nationalization has been postponed to May 7.
The parties were supposed to appear in Kiev’s Economic Court on April 16, but the hearing will now take place after Ukraine has elected its next president. The second and final round takes place on April 21 between Poroshenko and the challenger Volodymyr Zelensky.
PrivatBank has become a hot topic in the final days of the election campaign with Poroshenko
suggesting that Zelensky’s close advisor, former Ukrainian Minister of Finance Oleksandr Danylyuk, has switched sides and now “works together with the person who represents the interests of the former owner of the bank in this court.”
Danylyuk was minister from April 2016 to June 2018 and therefore part of the nationalization of PrivatBank in December 2016. Zelensky is very publicly backed by Kolomoisky.
In a release on April 16, the President said "We heard information from the campaign of Mr. Zelensky about the attitude to PrivatBank. And after we heard it, lawsuits emerged immediately in the Ukrainian judicial system. In the first instance, not reformed ... And this is what Mr. Kolomoyskyi's lawyers are doing in order to immediately try to carry out denationalization of PrivatBank and return it to its former owners. What is the threat of this? I firmly believe that this is threatening with the crisis of the banking system. I am firmly convinced that Mr. Danyliuk knows very well that the issue of nationalization of PrivatBank was one of the key issues in our cooperation with the International Monetary Fund," Petro Poroshenko said.
In March, the American Embassy in Kiev
said it was “monitoring developments surrounding PrivatBank. Its nationalization was a milestone in economic reform and the fight against corruption.”
PrivatBank’s eurobonds were written off the lender’s balance sheet in 2016 as part of the nationalization. A group of international investors, advised by law firm Dechert, is challenging the write-off in the LCIA. The first filings were made in April 2017, as
reported. Today, quotes for the eurobonds rose to 29 cents on the dollar on the back of the news from the District Administrative Court, a source close said.
However, shortly after the write-off of the eurobonds and other obligations, PrivatBank repaid a $70 million loan to American agriculture firm Cargill. In a subsequent letter, the bondholders’ lawyer Dechert
argued that there is no reason to apply different and unequal treatment of the 2018 and 2021 notes and the Cargill obligations. Oleksandr Shlapak, CEO of PrivatBank in 2017, later explained that the temporary write-down of the Cargill debt was due to a “mistake” during the temporary administration of PrivatBank.
In 2018, the PrivatBank notes strengthened momentarily when a Kiev court ordered PrivatBank to return UAH 1.05 billion to the Surkis family, whose deposits were bailed in as part of the 2016
takeover. The business family had filed 42 lawsuits according to local media.