Reuters: Risk Rises KTB Bondholders Will Seek Legal Action
The risk holders of Corpbank’s dollar-denominated bond will pursue legal action against the troubled Bulgarian lender and the state has increased, Reuters has reported.
According to unnamed bondholder sources quoted by Reuters, Corporate Commercial Bank, or KTB, failed to make the final payment on the bond that matured last Friday.
Last month Reuters reported that holders of the USD 150 M bond, which include US and European hedge funds and financial institutions, were planning to sue the Bulgarian government if the bond defaults and KTB is tipped into insolvency. The bondholders had formed a creditors' committee and hired legal representation in Bulgaria to tackle the situation if KTB is declared insolvent. KTB already missed a coupon payment on the bond last month.
Late on Monday, Reuters quoted a group of KTB bondholders as saying that in the absence “[…] of any substantive communication from the government, bondholders will pursue legal remedies against the state and the bank.”
The bondholders highlighted that in addition to risking a long and costly legal battle, Bulgaria’s politicians risk “lasting damage to its reputation as an investment destination in the EU."
The European Commission last month urged the Bulgarian National Bank (BNB), which assumed full control of KTB and suspended all of KTB’s operations in June pending an audit, to speed up the repayment of guaranteed deposits at KTB.
However, on Monday the BNB and the caretaker Finance Ministry replied in a letter to Jonathan Faull, Director General of Directorate General Internal Market and Services of the European Commission, that under Bulgaria’s legislation the repayment of state-guaranteed deposits of up to EUR 100,000 equivalent can only start after a bank is declared insolvent, which is not the case with KTB.
Accusing the BNB and Bulgaria’s politicians on dragging their feet on the rescue of country’s fourth-largest bank, a group of KTB depositors gathered in front of the BNB’s building in Sofia on Monday afternoon to demand immediate access to their money blocked in KTB.
In their letter to Faull, the BNB Governor Ivan Iskrov and caretaker Finance Minister Rumen Porozhanov said that Bulgaria’s banking legislation currently provides no option for an interim partial access to deposits in a bank put under special supervision by the BNB. To amend the law, Bulgaria needs a functioning parliament, which won’t be in place until after the October 5 snap election.
“In case the Bank Deposit Guarantee Fund repays the guaranteed amount of the deposits placed with a bank under special supervision while its financial situation is being reviewed, and with no decision reached for its insolvency yet, the bank may lose the larger part of its depositors, which would make its recovery pointless or impossible,” the letter read.
KTB's dollar bond traded around 30 US cents to the dollar on Monday after the bank failed to repay it on Friday. Currently, the bond has a seven-day grace period before it is declared officially to be in default, Reuters said.
- » The Economist: Bulgaria, Moldova Presidents 'Less Pro-Russian Than Advertised'
- » AFP: Bulgaria's Radev 'Struck a Chord by Attacking the Status Quo'
- » Politico: Bulgaria May Veer Shaprly Back into Moscow Orbit after Presidential Vote
- » Bulgaria's Radev 'Benefited from Popular Resentment against Coalition' - FT
- » FT: Ex-Air Chief Threatens to Upturn Apple Cart of Bulgarian Politics
- » Russian Paper: Bulgaria 'Was Docile NATO, EU Member' Under Last Socialist President
They say the bank is under supervision and it is not insolvent ,then why is it closed ?
The BNB/Government are not being open and transparent about what is going on .
Bond holders greedy gamblers who when they lose think they can be first in the queue to claim and if they don;t get paid well, sue go to court ,SHOULD HAVE READ THE SMALL PRINT BG LEGISLATION .
Neither the Government or BNB cared about any of this until they realised that a lot of their FRIENDS the people who own large companies with state contracts and EU funds , STATE FUNDS where held by this bank ,now they need to get all of those funds out of the KTB bank without anyone knowing before they reopen the doors to anyone else . Problem is EUC and the rest of the financial world is watching .