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Report: Privatbank bondholders complain of unequal treatment

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Report: Privatbank bondholders complain of unequal treatment

Lawyers representing investors holding PAO KB Privatbank eurobonds that were bailed in during the bank's nationalization sent a letter to the lender, Ukrainian authorities and the U.S. and Swiss embassies in Ukraine protesting against the unfair treatment of the bonds and requesting their repayment, Concorde Capital said Jan. 31.

The letter reportedly mentions Cargill Financial Services, whose loans to Privatbank were reportedly bailed in, but later "acknowledged as outstanding or repaid in full." The bondholders argued that by restoring the loans, Ukrainian authorities offered special treatment to Cargill, and they demanded the eurobonds be treated the same way, Concorde Capital said.

Concorde Capital's head of research, Alexander Paraschiy, noted that there is no confirmation at this stage that some of Privatbank's obligations to Cargill were first bailed in and later restored, so the Cargill case will not offer a precedent for the bondholders.

Privatbank said earlier in January that Cargill's accounts at the bank were restored and the company's funds are safe, but did not clarify the issue of potential bail-in of the lender's obligations to the firm, Concorde Capital also noted Jan. 27.

As part of Privatbank's nationalization, the Ukrainian deposit guarantee fund converted Privatbank's financial obligations worth 29.4 billion Ukrainian hryvnia into the lender's shares and sold them to the Ukrainian Finance Ministry for 1 hryvnia. The bail-in also included all eurobonds of Privatbank. In line with Ukrainian law, the fund had the right to bail in unsecured Privatbank obligations other than current or deposit accounts, as well as its obligations to affiliated entities. The bondholders argue, however, that there are no grounds to treat them as the bank's affiliated or related parties, Concorde Capital noted.

Meanwhile, the lender itself said Feb. 1 that the previous day, it repaid central bank refinancing loans worth 2.4 billion hryvnia plus 215.7 million hryvnia of interest on the loans. The total value of refinancing loans provided for Privatbank by the Ukrainian central bank stands at 15.5 billion hryvnia as of the beginning of February. The lender also noted that it had repaid 41.1 billion hryvnia of refinancing loans since 2014, as well as 13.6 billion hryvnia worth of interests on the loans.

As of Jan. 31, US$1 was equivalent to 27.09 Ukrainian hryvnia.