26 December 2016, Monday, 12:42 244

NBU Confirms Conversion Of PrivatBank's USD 595 Million Eurobond Into Capital

The National Bank of Ukraine (NBU) has confirmed conversion of PrivatBank's USD 595 million Eurobond into capital.

Ukrainian News Agency learned this from a statement made by the NBU press service.

PrivatBank has the following notes in issue: USD 175 million 10.875% Loan Participation Notes due 28.02.2018; USD 200 million 10.25% Loan Participation Notes due 23.01.2018; USD 220 million 11% Loan Participation Notes due 2021 (Subordinated Notes).

The Notes are issued by an SPV established in the UK which has on-lent the proceeds of the issue of the Notes to PrivatBank under four loan agreements. These loans are separately secured by the SPV in favor of the relevant trustee appointed in respect of the applicable Notes by way of assignment and charge for the benefit of the trustee and the holders of the relevant Notes.

Article 41.1 of the Law of Ukraine on Households Deposit Guarantee System provides for the resolution of a regulated bank by appointment of a temporary administrator, the bail-in of certain liabilities and the nationalization of the bank. Pursuant to the exercise of Article 41.1 in respect of PrivatBank, each of the loans represented by the loan agreements were bailed-in during the temporary administration of PrivatBank. The nationalization of PrivatBank (at which point the temporary administration of PrivatBank ceased) has also occurred on 21 December 2016. Payments under each series of Notes are made on a limited recourse basis to the extent that principal, interest or other amounts are received by the issuer of the Notes under the relevant Loan Agreement and as such where no payments are made under the Loan Agreements following bail-in, no payments will be made under each series of Notes. Further detail will be announced in due course.

As Ukrainian News Agency earlier reported, PrivatBank has three series of Eurobond: USD 175 million and USD 200 million due 2018, and USD 220 million due 2021.

The Bail-in mechanism, used for the financial recovery of problem banks, supposes either conversion of deposits into shares in the financial institution, or into a special subordinated debt to replenish the capital.

The Ministry of Finance on December 21 acquired ownership of 100% of shares in PrivatBank.

PrivatBank's Noteholders plan to challenge at court the conversion of bond into capital.