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. Last Updated: 07/27/2016

Court Shuns Foreign Creditors As Promstroibank Liquidated




A Moscow court has slighted foreign creditors to rule for the liquidation of banking dinosaur Promstroibank.


The court concluded that it was impossible to restore the bank's liquidity after the Central Bank said there were no funds to cover Promstroibank's negative equity of 3.3 billion rubles ($125 million), Vedomosti reported Friday.


But while the Central Bank - which said it was a major creditor of the bank owed 514.2 million rubles of Promstroibank's total debt of 4.6 billion rubles - pushed for a bankruptcy ruling, the Promstroibank's foreign creditors protested the decision.


The creditors said Thursday they would file an appeal.


Analysts said Friday that even though foreign creditors are reportedly owed 60 percent of Promstroibank's total debt portfolio, it would be unlikely for the court's decision to be overturned.


"Foreign creditors may hold some clout with the Central Bank, but the IMF and the World Bank are still pushing for banks to be closed down and this would probably tip the balance," said Margot Jacobs, a banking analyst at United Financial Group.


"Promstroibank's shareholders have largely abandoned the bank already; tellingly, nobody would be really hurt if the bank disappeared, making it an easy target for the Central Bank," she said.


"It's in foreign creditors interests to fight the decision because they are likely to get at least some return from restructuring rather than nothing at all if the bank is liquidated," she said.


Headed by German banking house, Bayerische Hypo-und-Vereinsbank, the creditors are appealing for the bank to be taken over by Russia's Agency for Restructuring Credit Organizations, or ARKO.


Promstroibank was taken under ARKO's wing earlier this year, when the agency said in June it would extend a 3.1 billion ruble credit to help rescue the bank. A week later, the Central Bank revoked Promstroibank's license.