Final report of the Bankruptcy Administrator to the Creditors of Akcinė Bendrovė Bankas Snoras (bankrupt) for the period ending 4 November 2014

Transcription

1 Final report of the Bankruptcy Administrator to the Creditors of Akcinė Bendrovė Bankas Snoras (bankrupt) for the period ending 4 November March 2015

2 Contents 1 Introduction Executive summary Overview of key events in the Period Overview of key achievements of the Bankruptcy Administrator Income and expenses Income Expenses and distributions to creditors Operational review Size and shape staff review Branch network Other operating costs Operating budget Assets remaining to be realised Progress with the bankruptcy Tangible asset realisations Loans Determination and payment of creditor claims Litigation Sale of subsidiaries Disclaimer: This report is prepared by the former Bankruptcy Administrator of Akcinė bendrovė bankas Snoras (Snoras, the Bank) pursuant to the request made by the Creditors Committee appointed by resolution of the first creditors meeting dated 12 June 2012 (the Committee). The information contained in this report is principally based on the information and investigations undertaken by Neil Cooper in his role as Bankruptcy Administrator up to 4 November Given the ongoing investigations and review, the information in this report should not be regarded as definitive or conclusive and may be subject to further review by the Bankruptcy Administrator. No representation, warranty or other commitment is given in respect of the accuracy and completeness of the information in this report. No party may rely on the contents of this report or the information contained within it and Snoras, the former Bankruptcy Administrator and their respective employees agents, advisers and the Committee shall not be responsible or liable for the information contained in this report or for reliance by any party on it. Please note that figures in this report may include minor rounding differences. (bankrupt)

3 1 Introduction This report is drawn up to 4 November 2014, and is the final report to creditors by Neil Cooper relating to his period as Bankruptcy Administrator. Mr Cooper advised the Committee of his intention to retire and after a procurement process to select a new Bankruptcy Administrator, the Committee applied to Court for confirmation of Mr Cooper s resignation and appointment of his replacement. The Court ruled in this respect on 28 October 2014, and after a short delay to allow for any appeals to be lodged, Mr Cooper was released as Bankruptcy Administrator with effect from 4 November The new Bankruptcy Administrator assumed responsibility for the control of the case for the period from 5 November onwards. This report to the creditors includes a summary of the activities in the bankruptcy for the period from 1 October 2014 to 4 November 2014 (the Period) and a summary of the key achievements since the appointment of the Bankruptcy Administrator. There remain a number of issues to be resolved in the bankruptcy that will be administered by the new Bankruptcy Administrator, UAB Valnetas. The amounts estimated to be paid to creditors will ultimately be determined by: the overall amount of money recovered from the assets of the Bank; the amount and ranking of approved claims of creditors in the Snoras bankruptcy; and the costs incurred during the bankruptcy process. (bankrupt) 1

4 2 Executive summary 2.1 Overview of key events in the Period The key events and work carried out in the bankruptcy in the Period are summarised as follows: Gross receipts in the bankruptcy to the end of the Period amounted to LTL 2.5 billion, LTL 21.7 million of which was received in the Period. Distributions to the second ranking creditor during the Period amounted to LTL million. The total amount distributed to creditors to the end of the Period was LTL 1.9 billion. Total loan servicing receipts (cash interest and principal repayments) of LTL 21.0 million were collected by the Bankruptcy Administrator bringing these receipts to over LTL 1.3 billion to the end of the Period. Total cash receipts from bank owned and foreclosed property sales during the Period totalled LTL 0.4 million, which included LTL 350,000 of advance payments in respect of sales which completed after the Period end. Cash receipts from the sale of moveable assets during the Period were LTL 28,028. The Swiss claims continue to be progressed and the Bankruptcy Administrator awaits details of the appeal process in relation to the settlement with Ernst & Young Baltic. The agreement was signed for the sale of the companies comprising the Finasta Banking Group (Finasta) to a consortium led by AB Invalda LT on 4 November The minimum purchase price and the method of sale of the retail and corporate loanbook were approved by the Committee on 4 November Overview of key achievements of the Bankruptcy Administrator The key achievements of the Bankruptcy Administrator since appointment are summarised below: total asset realisations of LTL 2.5 billion; loan realisations of LTL 1.3 billion; sales agreed of bank owned property of LTL 67.5 million; receipts from foreclosed asset sales of LTL 47.1 million; agreement of claim against Ernest & Young Baltic for LTL 40.0 million; agreement for sale of Finasta to AB Invalda LT and consortium for LTL 23.4 million; sale agreed, in principle, of the retail and corporate loan portfolio for LTL million to be completed in 2015; processed more than 18,000 creditors claims with a total value in excess of LTL 7.2 billion; and total distributions to creditors of LTL 1.9 billion. (bankrupt) 2

5 3 Income and expenses 3.1 Income The table below shows the breakdown of cash income in the Period, totalling LTL 21.7 million: LTL 000 Cumulative to 30 Sep 2014 Period 1 Oct to 4 Nov 2014 Cumulative to 4 Nov 2014 Income Rental income 8, ,153 Interest received on securities and on cash balances held 27, ,495 Loan interest and charges 177,375 3, ,609 Total income 212,772 3, ,257 Asset realisations Loan repayments 1,122,953 17,786 1,140,739 Funds held by financial institutions 751, ,549 Financial assets 195, ,747 Investments in subsidiaries 17,596-17,596 Fixed assets, investments and other assets 97, ,074 Cayman loan repayments (transfer from frozen account) 34,893-34,893 Litigation costs awards Total cash receipts 2,434,056 21,695 2,455,751 Points to note regarding the income in the Period are as follows: Rental income Rent totalling LTL 51,548 was received in the Period. Total rental income collected since the appointment of the Bankruptcy Administrator is LTL 8.2 million. Interest received on securities and cash balances held Since the appointment of the Bankruptcy Administrator LTL 27.5 million has been received, of which LTL 0.2 million has been collected in the Period. This amount includes interest from securities, term deposits, deposit accounts and realised profit made from the sale of securities. Loan servicing payments Loan receipts totalling LTL 21.0 million were received in the Period from loan repayments and refinancing. In addition to the cash receipts detailed above other factors discussed in section 4.5 impacted the balance sheet value of the loan book. (bankrupt) 3

6 Fixed assets, investments and other assets Total income from the sale of fixed assets, investments and other assets in the Period was LTL 0.4 million. This included proceeds from the sale of the Bank s real estate, comprising LTL 49,315 in respect of foreclosed assets and LTL 0.3 million in respect of Bank owned properties. Funds received from the sale of motor vehicles and other moveable assets in the Period were LTL 28, Expenses and distributions to creditors Payments during the Period totalled LTL million (including VAT), including LTL 2.9 million of operating expenses, LTL 0.6 million of professional fees and distributions to creditors of LTL 150 million. The table below summarises payments for the Period, together with cumulative costs since the start of the bankruptcy to the end of the Period: LTL 000 Operating expenses Cumulative to 30 Sep 2014 Period 1 Oct to 4 Nov 2014 Cumulative to 4 Nov 2014 Personnel 56,737 1,301 58,038 Premises 13, ,356 Assets 9, ,376 Communication and IT 17, ,067 Security and insurance 3, ,013 Other expenses 3, ,491 Total operating expenses 104,404 2, ,340 Non-operating expenses Professional fees and disbursements 161, ,155 Other payments 44,503-44,503 Total non-operating expenses 206, ,658 Payments to creditors Payments to first ranking creditors 9,362-9,362 Payments to second ranking creditors 1,725, ,000 1,875,000 Total payment to creditors 1,734, ,000 1,884,362 Total payments 2,044, ,564 2,198,360 Additional detail in relation to the operating expenses is provided in the next section of this report. The non-operating expenses paid in the Period are summarised as follows: Professional fees and disbursements: professional costs of LTL 0.6 million were paid in the Period in relation to the bankruptcy. It should be noted that professional fees and disbursements paid within the Period do not represent payment of fees incurred from 1 October 2014 to 4 November The delay represents the time taken to complete all necessary reports and seek approval from the Committee, and allow lodging of the Committee minutes at Court. (bankrupt) 4

7 Payments to creditors: further distributions of LTL million were made to the second ranking creditor in the Period. Total distributions to the first and second ranking creditors amount to LTL 1.9 billion. The payment plan approved by the Court includes further payments of LTL million by 30 November and LTL 75.0 million by 31 December. These were made after the end of the Period on 28 November and 23 December respectively. (bankrupt) 5

8 4 Operational review 4.1 Size and shape staff review Throughout the bankruptcy, the Bankruptcy Administrator has reviewed the Bank s staffing level on a regular basis to align staff numbers and costs with the objectives of the bankruptcy. Most recently, as previously reported, a number of staff contracts were due to expire on 30 September These were extended for four months to 31 January 2015, in line with other employees. No further size and shape staff review took place during the Period. At the end of the Period, 121 (114 full time equivalents) staff were employed. The number of staff which has left the Bank since the start of the bankruptcy is 1,263. This amounts to a 91% reduction in the overall workforce. 4.2 Branch network The Bank s branch network comprises ten properties; nine of which are owned, including the head office in Vilnius, and one which is leased. One branch, Utena, is closed. The other nine branches remain in use to facilitate the collection of outstanding loans and to provide a point of contact for the Bank s loan customers. 4.3 Other operating costs IT systems and contracts The Bank s IT system is an integral part of managing the bankruptcy efficiently. The Bankruptcy Administrator regularly reviews IT requirements and the total cost of the IT department and implements changes where possible to reduce costs. This includes changing suppliers where possible or renegotiating existing contracts in line with the Bank s reduced data consumption. As IT contracts come up for renewal, the Bank manages the procurement of the ongoing service through a tender process. This ensures that the Bank obtains a competitive price for the IT services it consumes. In line with all other companies in Lithuania, the Bank had to prepare for the adoption of the EURO currency on 1 January The Bankruptcy Administrator successfully negotiated a contract with an IT supplier to undertake this project, which commenced on 1 July 2014 and has been completed within the agreed timeline Premises, assets, security and insurance These costs are linked to the number of assets owned by the Bank, with reductions driven by disposals. Premises, security and insurance costs are linked to the number of properties held by the Bank and fluctuate in line with the number of foreclosed properties under the Bank s control at any one time. Other costs are influenced by the loan portfolio administration activity and include bailiffs expenses and enforcement costs. (bankrupt) 6

9 4.4 Operating budget At the request of the Bankruptcy Administrator, the Committee approved an operating budget totalling LTL 2.4 million for the period of 1 October 2014 to 31 October The actual costs incurred in this period were lower than budgeted. The costs included payment of personnel costs which were accrued in the previous period, timing differences in personnel tax payments and accrual for costs incurred in the Period to be paid in the future. The table below summarises the costs incurred relating solely to the budget period, with a favourable variance to budget of LTL 12,000. Operational expenses (LTL000) Actual LTL 000 Budget LTL 000 Difference LTL 000 Personnel (63) Premises Assets (26) Communication and IT Security and insurance (3) Other expenses (3) Total 2,391 2,403 (12) The principal differences between budgeted and actual costs are summarised below: Personnel: personnel costs were lower than budgeted due to employees leaving the bank voluntarily. Premises: premises costs are higher than forecast due to the requirement for electrical works and inspections to be carried out in preparation for the winter season. Assets: total costs were lower than expected as fewer foreclosures than expected meant asset recovery expenses were less than forecast. In addition, there was a timing difference with payment of securities custody fees. Communication and IT: costs were higher than budgeted due to the timing difference of a contract cost included in the forecast for the previous period. Security and insurance: costs were lower as a result of a timing difference in insurance payments and exchange rate movements. (bankrupt) 7

10 4.5 Assets remaining to be realised The table below shows the net book value of the Banks remaining assets, following a recent review of the provisions: LTL millions Position at 07 Dec 2011 Position at 30 Sep 2014 Movement in the Period Position at 4 Nov 2014 Loans 2,574 1,045 (14) 1,030 Fixed assets (0) 66 Other assets (3) 132 Financial assets (26) 47 Investments in group companies Intangible assets Totals 3,217 1,319 (44) 1,275 The material provisions and realisations in the current Period are detailed below: Loans: during the Period capital and interest payments of LTL 21.0 million were received and LTL 0.1 million of foreclosed assets were recovered. The balance sheet amount increased by LTL 1.5 million due to other net movements (foreign exchange movements and set-offs), loan impairments of LTL 0.1 million and LTL 5.1 million in accrued interest. The movement has resulted in a net balance sheet reduction of LTL 14.4 million in the Period. Fixed assets: the balance sheet value of fixed assets reduced by LTL 0.4 million as a result of the sale of the Bank s real estate, foreclosed and moveable assets. During the Period, agreement was also reached on disposal of properties in Latvia, and Ukraine. The completion processes for these transactions continued after the end of the Period and will result in further significant receipts in subsequent periods. Other assets: the decrease is due to the sale of LTL 0.2 million of foreclosed assets and associated costs totalling 3.2 million (impairment, revaluation and write off costs); whilst LTL 0.1 million of foreclosed assets were brought in during the Period. Financial assets: during the Period financial assets have reduced because, on maturity, the funds have been distributed to creditors rather than re-invested. In addition to the tangible assets noted above, the Bank has the potential to recover significant value through a number of litigation claims which are currently in progress. These claims are discussed further in the next section. (bankrupt) 8

11 5 Progress with the bankruptcy A summary of the progress achieved in each of the key areas of the bankruptcy is provided below. 5.1 Tangible asset realisations An update in relation to the various asset categories is provided below Bank owned property The sale of the Bank owned properties in Lithuania is being managed by Colliers International (Colliers) and details of all unsold properties available can be inspected on Colliers website ( The Bank also owned properties located in France, Latvia (two) and Ukraine, all of which were marketed for sale by Colliers or their regional affiliate. Where possible, the foreign properties are being sold in accordance with the laws of Lithuania or, where this is not feasible, those of the relevant jurisdiction. The Bankruptcy Administrator continues regularly to review the sale strategy with the real estate agents and the Committee. One property located in Latvia was sold prior to the Period. A sale of the second property located in Latvia was agreed during the Period and completed on 2 December Cash receipts received in the Period were LTL 345,280. The property located in Ukraine is owned by a subsidiary company of the Bank, and sale proceeds will be used to repay an outstanding loan to the Bank. The sale of this property was agreed during the Period and completed in December The property in France remains unsold and continues being marketed for sale. From appointment up to 4 November 2014, sales have been agreed for a total of 12 Bank owned properties for LTL 67.5 million. Of this, LTL 47.7 million had been received by 4 November with the balance received by end of Foreclosed assets: less than LTL 1 million each The total number of foreclosed properties for sale fluctuates as properties are sold and newly foreclosed assets are added to the portfolio. The new properties are grouped together in batches to be sold at the forced auctions. During the Period, the sale of one property was agreed. Cash receipts in the Period totalled LTL 49,315. The remaining unsold properties continue to be marketed by Colliers and offered for sale at forced auctions and in the free sales, in accordance with the policy approved by the Committee. (bankrupt) 9

12 5.1.3 Foreclosed assets: greater than LTL 1 million each The Bankruptcy Administrator continues to review the sale strategy for the unsold properties with the local real estate agents taking into consideration the market activity in the region. The remaining unsold foreign foreclosed properties are located in Estonia (three) and Russia (two). The properties in Estonia comprise residential and office accommodation and are now being sold via the free sale process in accordance with the Sales Policy. The foreclosed properties in Russia comprise a motel complex and commercial premises. The properties are being marketed by Colliers in Moscow to be sold by private tender, which is a more appropriate method of sale for this type of property. An offer was accepted on the commercial premises, but the sale did not complete and the buyer later withdrew. No offer has yet been received on the motel complex Moveable assets The Bankruptcy Administrator continues to identify assets that have become surplus to the Bank s requirements as the wind down of the Bank s operations progresses. These assets include motor vehicles, IT equipment and office furniture. The moveable assets are being sold via weekly auctions at the Bank s head office, or via specialist third party agents (in the case of the motor vehicles). All of the assets offered for sale are advertised ahead of the relevant auction on the Bank s website ( Total cash receipts for the sale of moveable assets in the Period were LTL 28, Artwork As previously reported, the Bank owned 27 paintings by various artists (the Artwork). The Artwork had been professionally valued by three independent valuers, and was offered for sale to the public in an auction held on 29 May At the first auction five paintings were sold for a combined realisation of LTL 16,150. The Committee approved the sale of the remaining paintings at a second auction which was held on 27 November A further painting was sold for LTL 1,500 out-with the Period. The remaining unsold paintings are available for purchase and any expressions of interest should be made via the Bank s website ( (bankrupt) 10

13 5.2 Loans Loan servicing income in the Period was LTL 21.0 million. Asset foreclosures during the Period were insignificant (LTL 0.1 million). As previously reported, in October 2013 it was decided in conjunction with the Committee to initiate an exploratory sale process in relation to the Bank s largely Lithuanian retail and corporate loan portfolio (the Portfolio). Following a tender process, the Bankruptcy Administrator engaged Zolfo Cooper Capital Management (ZCCM) to act as the sales agent to perform and manage the sales process of the Portfolio. The Bankruptcy Administrator completed the first phase of the sale of the Portfolio in January with four bidders progressing to the next phase. This was completed in June 2014 with binding offers submitted by three potential investors. Further negotiations were undertaken up until 30 October resulting in improved offers being submitted and presented to the Committee. On 4 November, the Creditors Committee agreed a minimum purchase price and the method of sale. The Bankruptcy Administrator proceeded to negotiate a definitive sale agreement with the selected investor. In the meantime, the Portfolio is being actively managed to achieve the forecast level of collections and manage default rates. The sale of the Portfolio is expected to complete in Determination and payment of creditor claims As at 5 November 2014, there were 28 disputed claims to be determined by the First Instance Court, the Court of Appeal or the Supreme Court. The majority of these claims still await hearing dates or rulings from the Court. Of these, three claims relate to claims submitted by Alexander Antonov. In order to assist the Court with this process the Bankruptcy Administrator has provided written explanations to the Court for all of the remaining disputed claims. The Court is reviewing this information to ascertain whether there is a need to hold a Court hearing with the participation of all parties, or whether judgment can be passed based on the written explanations provided. However, this process has been delayed due to the replacement of the Vilnius Regional Court judge in recent months VĮ Indėlių ir investicijų draudimas (DIF) During the Period, distributions to the DIF totalling LTL million were made in line with the fourth Court approved plan. DIF s current agreed claim is LTL 4 billion, of which a total of LTL 1.9 billion has been distributed to the end of the Period. (bankrupt) 11

14 5.3.2 Share issue As previously reported in the nine month report to 30 September 2014, the Bankruptcy Administrator received claims from 262 rights issue investors requesting the Court to recognise them as depositors of the Bank so that they may claim deposit insurance. Additional pleadings were subsequently submitted by the claimants and the Bankruptcy Administrator. The claim was rejected by the ruling of the Court on 29 September An additional 33 claimants filed a further request to the Court asking for their claims to be accepted as deposits. Responses have been filed and the Court hearing is scheduled for 26 January Deposit Certificates and Bonds Written responses in relation to the claim to the European Court of Justice (ECJ) were submitted by the Bankruptcy Administrator and other parties to the ECJ. The ECJ invited all parties to the request to an oral hearing in Luxembourg on 20 November 2014, where the request was examined by the Second Panel, consisting of five judges. The Advocate General of the ECJ shall provide his written opinion on 5 February The Advocates General opinion is not binding; however, such advice is generally followed in most ECJ cases. The final ECJ ruling is expected later next year (usually the ECJ makes the ruling within three to four months after the Advocates General s opinion is received). Until the ECJ adopts a ruling on this matter, the Bankruptcy Administrator has requested that all deposit certificate and bond claims currently listed in lower Courts are suspended. (bankrupt) 12

15 5.3.4 Approved claims The table below reflects the number and value of admitted claims as at 31 October 2014 less any amounts already distributed to first and second ranking creditors: Priority ranking Number of approved claims Sum of approved amount (LTL million) , ,145 2, Grand total 17,170 4, Ceded claims Ceded claims continue to be lodged and are dealt with by the Bankruptcy Administrator as and when they are received. After examination of the ceded claims, the Bankruptcy Administrator provides all the information and relevant documentation to the Court. At 4 November 2014, a total of 110 cession claims had been submitted to the Court. Of these, 107 have been completed and 3 remain open, all of which have been listed for consideration by the Court. 5.4 Litigation Switzerland The potential claims in Switzerland continue to be progressed; however, at a speed dictated by the local criminal process, which the Bankruptcy Administrator s lawyers are monitoring. One significant claim has been drafted and was sent to the proposed defendant in July 2014 seeking a substantive response and/or a meeting to discuss settlement, prior to any decision to file the claim being made. As at 4 November 2014 the proposed defendant had requested a meeting with the Banks representatives. The outcome of this meeting will dictate the Bankruptcy Administrator s next steps. Work on two further claims, against two additional proposed defendants continues and claims are in the process of being drafted in this regard The civil claim against Messrs Antonov and Baranauskas The civil claim against Messrs Antonov and Baranauskas was filed by the Bank in May 2012, supported by a World-Wide Freezing Order obtained on 18 May 2012 against the assets of Mr Antonov, for a value of at least LTL 1.7 billion. (bankrupt) 13

16 Following various discussions between the parties and in anticipation of the extradition hearing in the UK, the civil action against both Messrs Antonov and Baranauskas was stayed on 15 December On 20 January 2014, the UK Court ruled in favour of the State of Lithuania that the extradition of Messrs Antonov and Baranauskas should proceed. However, an appeal was lodged shortly afterwards and a date of 22 July 2014 was set by Court for this hearing. This is now listed to be heard in February The World-Wide Freezing Order remains in place, irrespective of the stay in the proceedings, and the Bankruptcy Administrator s team continues to monitor this as required Claim against Raimondas Baranauskas Vilnius Regional Court upheld the Banks claim against Mr Baranauskas on 4 July 2013, and ordered that Mr Baranauskas pay the amount of LTL 4.7 million to cover losses. Mr Baranauskas appealed this decision, which was heard in the Court of Appeal on 24 April The Court of Appeal rejected Mr Baranauskas appeal, and upheld the Vilnius Regional Court s decision. No appeal was lodged or accepted by the Lithuanian Supreme Court and therefore the judgment against Mr Baranauskas is valid and may be enforced. The Bankruptcy Administrator is reviewing the enforcement options Judgment against V. Antonov, O. Jampolskaja, A. Antonov and T. Antonova The Vilnius Regional Court upheld the Banks claim against Mr V. Antonov, Ms O. Jampolskaja, Mr A. Antonov and Ms T. Antonova in full and awarded the Bank LTL 20.2 million (including interest and contractual penalties) jointly from all parties. The decision was open to appeal but the time for this has now lapsed and the judgment is final. The Bankruptcy Administrator has commenced protective and recovery proceedings against the various parties Ernst & Young claim Following investigations by the Bankruptcy Administrator regarding the Bank s claim for losses arising from the historical audit of the Bank, negotiations were finalised with Ernst & Young Baltic (EYB) regarding potential settlement of the claim(s). The Bankruptcy Administrator put a recommendation to the Committee for consideration to accept the settlement offer from EYB, which was approved by the Committee on 2 October Following approval to accept the settlement, the decision was appealed on behalf of a group of creditors. After the end of the Period, the Court ruled in favour of the Bankruptcy Administrator, but a further appeal has been lodged. (bankrupt) 14

17 5.5 Sale of subsidiaries The Finasta Banking Group The Bankruptcy Administrator had previously been negotiating a potential sale transaction with the LHV Group (LHV), who had approval from the Bank of Lithuania to acquire Finasta by 30 April Due to a change in the proposed structure of LHV s proposal, the deadline set by the Bank of Lithuania passed without a sale being completed. The Bankruptcy Administrator was approached by new parties who expressed an interest in acquiring Finasta. As such, the sale process was reopened to interested parties, three of which ultimately obtained Bank of Lithuania approval. After receipt of best and final offers from these parties in September, a recommendation was submitted by the Bankruptcy Administrator to the Committee, which approved the sale to the best bidder on 23 October The agreement for the sale of the Finasta in Lithuania and Latvia to AB Invalda LT and consortium was signed on 4 November In line with that agreement, completion occurred in three separate steps after contract and closure conditions were satisfied. The process was completed on 5 January Realisations totalled LTL 23.4 million. (bankrupt) 15

18 Akcinė Bendrovė Bankas Snoras (bankrupt) A. Vivulskio Str. 7 LT Vilnius