Ukraine's Prominvest buyers fail to make payment

17:42, 10 December 2008
Ukraine
1272 0

Due to a fall in Ukraine`s hryvnia currency?

The prospective buyers of Ukraine`s Prominvest bank, in receivership after a run on its deposits, failed to pay for the required purchase of shares, the bank said on Wednesday, Reuters reported.

An Austrian holding company, Slav AG, controlled by Ukrainian brothers and parliamentarians Andriy and Serhiy Klyuyev agreed to acquire the country`s sixth-largest bank by buying a share issue and working to raise deposits.

The central bank, whose deputy chairman is Prominvest`s administrator, has had to extend a deadline for the deal at least twice. A fall in Ukraine`s hryvnia currency of over 60 percent since September has complicated the transaction.

"The investors have not bought the shares," a Prominvest spokesman told Reuters. "We are waiting for the central bank to issue a resolution."

The brothers agreed to increase Prominvest`s capital by 900 million hryvnias ($121 million) via a share issue and raise an extra 3.6 billion hryvnias through deposits or subordinated debt.

A central bank official told Reuters that the central bank will decide later on Wednesday what next steps to take. A business daily reported on Tuesday that the central bank would extend the deal`s Tuesday deadline to Dec. 15.

It did not say why the deadline would be extended but noted that the central bank must finish a financial assessment of Ukraine`s largest banks by Dec. 15, which may in Prominvest`s case increase the size of recapitalisation needed. The central bank`s study was required by the IMF, which agreed to lend Ukraine $16.4 billion. Ukraine can use the IMF funds to nationalise failing banks -- something the government had said it wanted to do with Prominvest.

Earlier this month Prominvest said because the hryvnia has fallen dramatically in the past few months, the 3.6 billion hryvnias the buyers had to raise had risen to 4.4 billion.

This caused the second delay in the deal because the buyers had to agree changes to Prominvest`s financial plans. The first delay, in late November, was to allow for the buyers to bring in money from abroad for the transaction.

While the delays continue, Prominvest continues to be barred from paying out all deposits, which is affecting not just ordinary people but many heavy industry businesses which have been traditionally financed by the bank.

Reuters via Guardian

If you see a spelling error on our site, select it and press Ctrl+Enter