Ukrayina Bank Debts to Be Sold

If the new Ukrayina Bank liquidators led by prominent financier Kostiantyn Rayevsky follow the suit of their predecessors, law enforcement bodies will have to deal with the results of liquidation of one of this country’s largest — and now bankrupt — commercial banks as intensively as they traced those responsible for the bank’s demise. In the summer of 2001, when supervision over the Ukrayina liquidation was assigned to Kostiantyn Rusalin, The Day pointed out his direct links with one of the entities listed as a bank’s problem debtor and predicted a number of scandals (for example, the unsanctioned and even financially unsound leasing of some of the bank’s branches). Some time later, Mr. Rusalin was fired and what had been predicted came true. The liquidation then was taken over by Vitaly Strukov. chief of the Bankruptcy Agency. Yet, the spring of this year gave ample grounds to speak about abuses in selling Ukrayina’s non-banking property. The month before last Mr. Strukov had to stop his liquidating activities. Meanwhile, Mr. Rayevsky, who took over from him, confirmed at a September 6 press conference that the fears were not unfounded.

In addition to the above, it turned out that when the new Ukrayina liquidators took office, they found a shortage of bank property worth UAH 5.6 million (37.9% for computers, 24.5% for transportation vehicles, etc.). “The biggest shortages of the property were found in Kyiv, Cherkasy, and Dnipropetrovsk oblasts, and... at the bank’s head office,” Mr. Rayevsky noted, emphasizing that law enforcement bodies were searching for the liquidator’s regional representatives in Cherkasy, Vinnytsia, and Odesa oblasts (some of them have been charged with malfeasance). Mr. Rayevsky was also willing to reveal a spicy detail. Consider: just as Mr. Strukov was paying the essential expenses for the Ukrayina liquidation to the large number of bank employees (16,000 at the beginning of the liquidation), the staff was in fact being cut down. Moreover, the “select” Bankruptcy Agency functionaries were simultaneously listed as Ukrayina employees, drawing a... UAH 5000-a-month salary from the bankrupt bank.

However, Mr. Rayevsky was entrusted with far more important tasks. The question is about the bank’s second and third-stage creditors (the liquidator has already satisfied the first stage) who expect to have about UAH 1.5 billion refunded. The liquidator cannot solve this problem within the two remaining years by means of the non-bank property alone. On September 6 Mr. Rayevsky took some “insignificant,” to quote his predecessor, securities of twelve issuers out of Ukrayina’s stock market portfolio. Six of them have already been put up for auction at the starting price of UAH 1.25 million. The moveable estate is also being sold. In particular, 65 automobiles with a total starting price of UAH 1.3 million will be put on sale in Kyiv alone (the liquidator plans to sell a total 800 automobiles for at least 10 million hryvnias). Strange as it may seem, Mr. Rayevsky told The Day that among those who evinced interest in the Ukrayina auto fair are some of the bank’s former top executives. No specific makes of motor vehicles were named. Let us hope their price will not be the result of the arithmetical operation, that is, UAH 1.25 million divided by 65.

But this is not the main point. Obviously, no securities, automobiles, apartments, etc., will suffice to satisfy the second and third-stage creditors. What will be at stake in April 2003 is the whole Ukrayina complex, now being rented by PrivatBank Inc. According to Mr. Rayevsky, its representatives have already announced they wish to buy some facilities retail. Yet, they were denied this: “the sale of this property will only be possible after the latter is finally appraised, after it is clear how to sell it best — in the bulk or piecemeal at open auctions,” Mr. Rayevsky said. It is an open secret how open such things are done in this country. So let us note, just in case: at the outset of the Ukrayina liquidation, there was so much talk about the advantages of long-term leasing (this supposedly helps to essentially increase the liquidation mass). In any case, no concrete figures were announced to this effect.

But what really caused surprise was Mr. Rayevsky’s statement about the likely prospects for Ukrayina debtors’ problem liabilities. He assessed them as 1,267,115,150.94 hryvnias, “just in case,” in the national currency. It is clear in principle that the debts of the firms run by well-known political figures could be a good means to bolster the liquidation mass. But the trouble is that more than half these firms no longer exist and a considerable number of them have had their management changed. The Prosecutor General’s Office will find it difficult to spot any traces in the ocean of financial machinations. Then suddenly comes a highly original solution of the problem — to sell these debts. This is so original that Mr. Rayevsky said, asked by The Day, that Ukraine has not yet had this kind of practice. Nor are there any laws to this effect. Mr. Rayevsky added that consultations are now underway with the NBU on this matter. On the other hand, six commercial banks have already shown an interest in buying and selling the remains. Will any sound-minded financier choose to buy these problem liabilities? Or there still is some sense in all this? In that case, it would be a good idea to sell the problem firms’ debts at face value or at least at an open auction, so that rivals of the respected persons indebted to Ukrayina could also take part.