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. Last Updated: 07/27/2016

Central Bank Revives Uneximbank License




The Central Bank has decided to give former banking giant Uneximbank back its operating license, Central Bank chief Viktor Gerashchenko said Monday.


"The order [to revoke Uneximbank's license] has been suspended," Gerashchenko said. "A court will make a decision [on the bank's future] based on an amicable agreement [of creditors]," Reuters quoted him as saying.


The announcement came in the wake of last week's agreement between the bank and its creditors, when a torturous 13 months of negotiations ended with 99 percent of the creditors voting to approve Uneximbank's restructuring plans.


Gerashchenko had promised to review the Central Bank's June decision to revoke Uneximbank's license should creditors hammer out an agreement on a restructuring deal. The respite for Uneximbank came just a day before the date a Moscow arbitration court is due to hold a hearing on the bankruptcy case.


Uneximbank officials were unavailable for comment Monday.


Analysts said Monday that the court is likely to rule against bankruptcy and fall in line with both the creditors' wishes and the Central Bank's seal of approval for the restructuring plan.


The bank owes $800 million to foreign creditors and $400 million to domestic lenders, as well as $600 million on forward contracts.


Uneximbank's restructuring plan can proceed only if its license is restored.


"The Central Bank's decision was made possible by the very strong creditor support for restructuring," said Philip Granville, managing director of Flemings UCB, which has been acting as a financial consultant to Uneximbank on the restructuring deal.


The deal approved by creditors last week mapped out a scheme under which Uneximbank would make a cash downpayment of 10 cents for every dollar invested by creditors and issue a new package of 12-year Eurobonds worth $130 million, Granville said.


Other important components of the scheme are the creation of an investment group to tally up all of Uneximbank's assets and the eventual merger of Uneximbank with its operational "bridge" bank, Rosbank.


The Central Bank' s decision to return Uneximbank's license and its plan to merge back with Rosbank drew fire from banking analysts Monday.


"The Central Bank kept silent for nine months on restructuring the banking sector and only acted to revoke licenses when assets had already been stripped," said Marina Malutina, banking analyst at the Russian European Center for Economic Policy.


"By returning Uneximbank's operating license, the Central Bank is more or less giving a thumbs up to the imprudent banking practices it followed," she said.


Rosbank was created to take over the business of Uneximbank's major clients shortly after the bank was rendered illiquid in the August crisis last year.


Uneximbank's financial consultant, Granville, said that the bank had not engaged in asset stripping.


The creditors had commissioned auditors KPMG to review the bank's finances in March of this year, he added.


"Creditors would not have given their strong support for restructuring if that review had uncovered any evidence of asset stripping," he said.


Results of the review were confidential, he added.


The deadline for Uneximbank's merger with Rosbank has been set for July 1, 2000. The first coupon payment on the restructured Eurobonds would probably fall due after the merger, Granville said.


The remerger with Rosbank is essentially bogus as Uneximbank would be merging with itself, said Kim Iskyan, an analyst with Renaissance Capital.


"Creditors are hoping that someday there might be a viable institution created out of the merger that might choose to return some of their funds," he said.


Sergei Chernitsyn of Rosbank defended the creation of the bridge bank, saying that the move was essential for Unexim's survival and that the eventual merger would allow creditors demands to be met.