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. Last Updated: 07/27/2016

Ex-Giant Promstroi Declared Bankrupt

The Central Bank and investment group Sovlink have finally managed to put Promstroibank, one of only a handful of Soviet-era banks, out of its misery.

The Moscow arbitration court on Tuesday declared the former banking giant bankrupt, two years after it lost its license in the wake of the 1998 banking implosion.

But although the court appointed Sovlink prot?g? Vladimir Bovkun bankruptcy manager, odds are high that the creditors will not see their assets recovered from the bank any time soon.

"Judging by developments in other bankruptcy cases, I believe that the court decision will be appealed," said Sovlink boss Dmitry Pyatkin.

Sovlink, an investment company active in asset management and investment banking, accumulated about 10 percent of Promstroibank's debts last year, buying them at rock-bottom prices and putting its representative on the creditors committee in June.

Tuesday's bankruptcy decision is the second for the bank, which lost its license in the summer of 1999 after heavy pressure by the International Monetary Fund, which insisted on the liquidation of six banks as the first step to revamping the collapsed banking sector.

The bank was declared bankrupt in November 1999, but the decision was revoked by the courts the next year.

Promstroibank has debts of 5.4 billion rubles ($185 million) and a meager 2 billion rubles of assets on its books. Its main creditor is the Central Bank, which is owed 1.3 billion rubles. It is owned by a group of corporations, none of which has a controlling stake. Gazprom owns a blocking 25 percent plus one share.

The Central Bank has been actively trying to liquidate the bank, but has encountered resistance from former managers and lobby groups within the government, which at some point was considering handing it over to the state Agency for Restructuring Credit Organizations to replenish the bank with budget funds.

The bankruptcy ruling, which was requested by Kreditimpexbank in December last year, was delivered despite attempts by some foreign investors to bail out the bank.

Earlier this year, Carlingllen Services, a London-based recovery fund with some ?55 million ($38 million), mapped out a restructuring plan that promised to plow 2.7 billion rubles into putting the bank back in business. "Our funding is ready," said Christopher Downing, a director at Carlingllen in charge of the project. "All we have to do is go to the Central Bank and put our case forward."

Carlingllen said private investors were interested in Promstroibank's brand name and network. "Its branch network is useful," Downing said.

But exactly who these shareholders are and how they are going to recover their investments remains unclear.

According to Downing, shareholders of Carlingllen possess total assets of between ?2 billion and ?3 billion, and a small investment in Promstroibank may turn out to be a good play.

Sovlink's Pyatkin, however, said Tuesday he had not seen any viable proposal to resuscitate Promstroibank. "We have not received answers [from Carlingllen] that suit us," he said.

Pyatkin said he does not expect to recover the bank's debts anytime soon, but if Bovkun takes over the bank, he can at least get access to information about its financial situation.