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. Last Updated: 07/27/2016

MOST Wins Delay In Suit by Ministry

The Moscow Arbitration Court this week postponed the hearing of the Finance Ministry?s $118.9-million claim against MOST-Bank for failing to perform obligations under a trust management securities agreement.

The ministry in 1996 transferred at face value fourth- and fifth-tranche treasury bills worth $95 million to the bank, which was obliged to return the paper with interest in April 2000, but failed to do so.

When the ministry filed its claim, the bills were not in the bank, giving the ministry the right to demand their monetary equivalent. The claim amount includes the principal debt amount, coupon income and fines.

MOST-Bank representatives appealed to the court for a postponement last month after MOST-Bank was bought by state-owned Vneshtorgbank. The appeal was based on a restructuring plan ? proposed by MOST-Bank?s new management team ? that provided for an amicable agreement with the bank?s creditors, including with the Finance Ministry. The court approved the appeal and moved the hearing to Dec. 5.

Finance Ministry officials argued against the delay, saying that the money should be returned immediately because it had been written into this year?s budget and the financial year is drawing to a close. A ministry representative said that he doubted Vneshtorgbank would be able to cobble together a tight restructuring plan that would be suitable to all parties before the year?s end.

The Finance Ministry is the largest of the bank?s state creditors. Apart from the $119 million in securities, MOST-Bank owes the ministry an additional $160 million in the form of guarantees under loan agreements with Media-Most structures. In total, MOST-Bank owes the state about $450 million of the total $700 million claimed against it.

A source close to MOST-Bank management said the Finance Ministry?s tough rhetoric reflects the government?s general attitude toward the bank?s fate.

"The fact that the Finance Ministry has unilaterally announced its claims says one thing only: The government is against the restructuring of MOST-Bank and there can be no talk of amicable agreements," said the source, who asked that his name be withheld.

The government has yet to propose any alternatives to Vneshtorgbank?s plan, which means it most likely wants to bankrupt MOST-Bank, the source said.

MOST-Bank ran into trouble after the 1998 financial crisis, which wiped out almost all of the so-called oligarchs? banks. It managed to tread water for a while with the help of the Moscow city government, which used to park interest-free budget funds on the bank?s accounts, and a stabilization loan from the Central Bank. But earlier this year, when City Hall decided instead to use the Bank of Moscow, MOST-Bank went under.

Once the core of embattled tycoon Vladimir Gusinsky?s Media-MOST group, which includes the television station NTV, the newspaper Segodnya and radio station Ekho Moskvy, the bank was sold last month for just 5.5 million rubles ($198,000) ? or 1 ruble for each outstanding MOST-Bank share.