Report of the Bankruptcy Administrator to the Creditors of AB Bankas SNORAS (bankrupt) for the period ending 30 June 2015

Transcription

1 Report of the Bankruptcy Administrator to the Creditors of AB Bankas SNORAS (bankrupt) for the period ending 30 June August 2015

2 Table of contents 1 Introduction Executive summary Overview of key events and results of the Period Key events and results after the Period Key future actions Income and expenses Income Operational payments and payments to creditors Operational review Organisational structure and the staff number Branch network Other operating costs IT systems Premises, assets, security and insurance Fulfilment of the estimate of administrative expenses Assets remaining for disposal Course of the bankruptcy process Disposal of tangible assets Property sale procedure Sold real estate owned by the Bank in Lithuania Real estate (property complexes) owned by the Bank abroad Movable property Loans Taking decisions on creditor claims and satisfaction of such claims / Determination and payment of creditor claims Approved claims Litigation Civil claim against V. Antonovas and R. Baranauskas Claim to Ernst & Young Switzerland Disclaimer The bankruptcy administrator of AB Bankas Snoras (bankrupt) ( Snoras ) has prepared this report (the report ) in order to inform the creditors of Snoras about the progress of the bankruptcy procedure and to ensure transparency of the process. The information contained in this report is based on the information the bankruptcy administrator had on 30 June 2015, except for cases when this report expressly indicates otherwise. 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 in it. Snoras, the bankruptcy administrator, Snoras employees, agents, advisers and the committee of creditors are not 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. Report of the Bankruptcy Administrator to the Creditors of AB Bankas SNORAS (bankrupt) 2

3 1 Introduction By its ruling of 28 October 2014, the Vilnius Regional Court approved the resignation of Snoras bankruptcy administrator, Neil Hunter Cooper, as the bankruptcy administrator, and appointed UAB Valnetas as new bankruptcy administrator of Snoras. The ruling passed by the Vilnius Regional Court on 28 October 2014 came into force on 5 November Upon coming into force of the ruling, UAB Valnetas took over the functions of Snoras bankruptcy administrator. In spite of remaining issues to be solved in the bankruptcy process, amounts payable to creditors will eventually depend on: The total amount of money that the bankruptcy administrator will manage to recover and derive from assets owned by Snoras; The approved amount of creditors claims in Snoras bankruptcy proceedings; and Expenses of the bankruptcy process. This report to creditors was prepared as a follow-up of the report on events that occurred until 31 May The report gives a brief description of the bankruptcy process during three months, i.e. the report informs about events and results achieved in the period from 1 April 2015 to 30 June 2015 (the Period ). Report of the Bankruptcy Administrator to the Creditors of AB Bankas SNORAS (bankrupt) 3

4 2 Executive summary 2.1 Overview of key events and results of the Period Area of activity Disposal of tangible assets: Events and results A new asset sale procedure has been approved, according to which real estate will be sold in four auctions and then by way of free sales, whereas movable property will be sold in two auctions and then by way of free sales, unless the committee of creditors resolves to apply an exception to a certain asset. It was decided to terminate the agreement on sale of real estate in Lithuania through real estate intermediaries (brokers). It will be the bankruptcy administrator that will continue to sell all real estate located in Lithuania with the assistance of the Bank s employees. It was decided to continue selling of real estate located abroad with the assistance of real estate brokers or other persons if that is necessary according to the requirements applicable in the location of a relevant property (e.g. notaries public in France). Tender procedures are performed in order to acquire intermediation services. The Estonian office of Colliers, which has submitted the best tender bid, has been already chosen for sale of property located in Estonia. 10 real estate objects were sold during the Period for the total price of EUR 1,693, (the VAT inclusive). Loans Income from loan repayments received during the Period amounts to EUR 6,166,000, whereas the income from interest and charges amounts to EUR 3,435,000. The composition and the net book value of the loan portfolio have not changed significantly during the Period and amounted to EUR 261,505,000 at the end of the Period. Litigation There were no significant changes in essential legal proceedings during the Period. The bankruptcy administrator continues to analyse the situation concerning the influence of the escape of V. Antonovas and R. Baranauskas from Great Britain on the civil proceedings initiated in Great Britain. After the assessment of the situation is over, decisions that are best in line with interests of the Bank and its creditors will be taken. Other All branches of the Bank outside Vilnius were closed during the Period, except for the Klaipėda branch, which has been left in order to ensure the minimal convenience of customer service. A regular review of staff positions was made at the end of the Period and the number of staff was reduced from 100 to 81 from 1 July Report of the Bankruptcy Administrator to the Creditors of AB Bankas SNORAS (bankrupt) 4

5 2.2 Key events and results after the Period Area of activity Events and results Loans On 31 July 2015, an agreement for purchase and sale of the loan portfolio was concluded. Litigation On 23 July 2015, in a pre-trial investigation performed in Lithuania against the former shareholders and heads of the Bank, Snoras filed a civil claim for indemnification of property damage caused by criminal acts in the amount of EUR 487,052,000. Report of the Bankruptcy Administrator to the Creditors of AB Bankas SNORAS (bankrupt) 5

6 2.3 Key future actions Area of activity Disposal of tangible assets: Future actions To continue sales of all real estate and movable property not used in the operations of the Bank. To select (by way of a tender procedure) intermediaries for sale of property located abroad and to continue sales of property located abroad. To prepare the central office of the Bank at Vivulskio g. 7, Vilnius, for sale and to start the process of its sale. Loans To close the transaction of sale of the loan portfolio. Litigation To finish assessment of the need to change the litigation strategy in the civil case initiated against the former shareholders in Great Britain. Report of the Bankruptcy Administrator to the Creditors of AB Bankas SNORAS (bankrupt) 6

7 3 Income and expenses 3.1 Income The table below presents the breakdown of net proceeds from the commencement of Snoras bankruptcy process till the end of 2013 and 2014, in the 1 st quarter of 2015 and in the period from 1 April 2015 to 30 June The table also presents data about income from the commencement of the bankruptcy process till the end of the Period: EUR 000 Income Total as of 31 December 2013 Total as of 31 December 2014 QI 2015 During the Period till 30 June From the start of the bankruptcy process till the end of the Period Rental income 2,228 2, ,463 Interest on securities and on cash balances held 3,728 8, ,590 Interest on loans and charges 42,454 54,331 2,731 3,435 60,497 Total income 48,410 64,738 3,170 3,644 71,550 Disposal of assets Loan repayments 264, ,561 7,776 6, ,503 Funds with financial institutions 163, , ,670 Financial assets 56,169 56, ,701 Investments in subsidiaries 5,096 5, ,096 Fixed assets and other assets 5,095 34, ,501 36,276 Cayman loan repayments (transfer from frozen account) 10,858 10, ,106 Funds awarded in litigation ,610 11,869 Total cash receipts 553, ,688 11,157 22, ,771 Points to note regarding the income received during the Period are as follows: Rental income Rental income includes income of the Bank from lease of real estate. Interest on securities and cash balances held This amount includes interest on securities, term deposits, deposit accounts and profit made from the sale of securities. Fixed assets, investments and other assets This amount includes income from sale of fixed assets and other tangible assets. Funds awarded in litigation In earlier reports this category was titled as awarded litigation costs. The title of the category has been changed in order to identify the source of funds more accurately. The essential part of the funds awarded in litigation is the amount of EUR 11,584,800, which was received from UAB Ernst & Young Baltic according to the settlement agreement of 7 October 2014 approved by the Vilnius City Local Court on 5 May 2015 concerning the issues related to audits of the Bank, performed by UAB Ernst & Young Baltic before the nationalisation of the Bank. Report of the Bankruptcy Administrator to the Creditors of AB Bankas SNORAS (bankrupt) 7

8 3.2 Operational payments and payments to creditors The amount of the Bank administration expenses paid in the Period totals EUR 2,166,000: Amounts paid as operating expenses of the Bank are equal to EUR 1,204,000; and Payments to the Bank s consultants, including all additional expenses incurred in provision of the services, amounted to EUR 962,000. Effected payments and incurred administration expenses are different because some payments are made later than expenses are actually incurred. The actually incurred administration expenses are presented in section 4.4 of this report. The table below shows payments for the Period, also total payments since the commencement of the bankruptcy process: EUR 000 Operating expenses From the start of the bankruptcy process till 31 December QI 2015 During the Period till 30 June Total from the start of the bankruptcy process Personnel 9,794 3,975 3,570 1, ,023 Premises 2, ,264 Assets 1, ,020 Communications and IT 2,572 1,707 1, ,860 Security and insurance ,254 Other expenses ,120 Total operating expenses 17,348 7,824 6,484 1,680 1,204 34,540 Non-operating expenses Fees and disbursements to consultants and the 28,076 12,674 7, ,118 bankruptcy administrator Other payments 11,265 1, ,324 Total non-operating expenses 39,340 13,689 8,319 1, ,442 Payments to creditors Payments to first ranking creditors Payments to second ranking creditors Total payments to creditors 2, , , ,114 30,000 20, ,721 2, , ,114 30,000 20, ,432 Total payments 59, , ,916 32,812 22, ,415 Points to note regarding payments made in the Period: Operating expenses: the main reduction of the operating expenses is in the category of personnel expenses. The reduction results from the optimisation of the administrative structure of the Bank during the past quarter and reduction of the number of staff positions (employees). Disbursements to consultants and the bankruptcy administrator: EUR 929,000 was paid to the bankruptcy consultants and EUR 33,000 was paid to the bankruptcy administrator during the Period. Payments to creditors: EUR 20 million was paid to creditors during the Period in total. Report of the Bankruptcy Administrator to the Creditors of AB Bankas SNORAS (bankrupt) 8

9 4 Operational review 4.1 Organisational structure and the staff number Employment contracts of the Bank s employees were effective till 30 June With regard to the consistent decrease in the scope of operations and the liquidation of the network of branches during the Period, a regular review of the staff positions was made and a new list of staff positions was approved, which will be in effect for a term not going beyond 30 November At the beginning of the Period Snoras had 100 employees and their number decreased down to 81 on 30 June Save for 2 employees, all cancelled positions were positions of employees that worked in the liquidated branches. 4.2 Branch network Administration of Snoras bankruptcy process was carried out in the central office of Snoras in Vilnius at A. Vivulskio g. 7 and 8, and in Snoras branches in other cities and towns (Kaunas, Klaipėda, Šiauliai, Alytus, Mažeikiai, Marijampolė, Panevėžys, Tauragė). The bankruptcy administrator, having assessed the need for the network of branches, comparing and considering the recovered amounts of the loan portfolio and the maintenance costs of the branch network, decided to close branches in all other cities and towns, except for the Klaipėda branch. The Klaipėda branch has been left due to a big distance from Vilnius, in order to ensure the minimum convenience of customer service. The operations of the said branches were terminated during the Period and employment contracts of employees working in the branches expired on the last day of the Period. 4.3 Other operating costs IT systems Snoras IT system is a part of the efficient management of the bankruptcy process. After the review of the staff positions, the number of IT specialists was reduced to 5 (1 of them works half-time) from 1 July IT specialists ensure administration and support of Snoras IT system, provide assistance and adapt Snoras IT systems to new requirements, ensure proper integration of IT systems. IT specialists also ensure smooth functioning of finance and personnel accounting programs and various databases. All information systems that are currently necessary for Snoras are active and functioning. Some information systems, which Snoras does not need currently, are inoperative. Their recent system state data is copied, exported, archived and stored in back-up archive tapes in a special inflammable / antimagnetic safe that is located separately from the main server room Premises, assets, security and insurance These costs are related to the number of assets owned by Snoras, with reductions driven by disposals. Premises, security and insurance costs are related to the number of properties owned by Snoras and fluctuate in line with the number of foreclosed properties under Snoras control at any one time. Other costs are influenced by the loan portfolio administration activity and include bailiffs expenses and enforcement costs. 4.4 Fulfilment of the estimate of administrative expenses In the course of the bankruptcy procedures the Bank incurs administration expenses, which, according to requirements of applicable legal acts, are to be approved by the committee of creditors. The table below shows the operating costs incurred in relation to the 2 nd quarter of 2015: Report of the Bankruptcy Administrator to the Creditors of AB Bankas SNORAS (bankrupt) 9

10 EUR 000 Actual Estimate Difference Operating expenses Personnel (64.9) Premises (24.8) Assets Communications and IT (20) Security and insurance Other expenses Total 1, , (23) The estimate of operating expenses for the Period has not been exceeded, but the estimate in some individual categories of expenses was exceeded. In the category of assets there were some unexpected expenses due to foreclosures. Unexpected expenses in the category of other expenses are commissions paid to property sale intermediaries (brokers) for property sales. 4.5 Assets remaining for disposal The table below shows the net carrying amount of Snoras remaining assets as of 30 June 2015, following a review of recent provisions: EUR March June 2015 Loans 270, ,505 Fixed assets 10,150 9,495 Other assets 40,245 41,130 Financial assets 8,433 4,904 Investments in group companies Total 329, ,208 Points to note regarding provisions and disposals during the Period: Loans: Income from loan repayments received during the Period amounts to EUR 6,166,000, whereas the income from interest and charges amounts to EUR 3,435,000. The composition and the net book value of the loan portfolio have not changed significantly during the Period and amounted to EUR 261,505,000 at the end of the Period. Fixed assets: Depreciation of fixed tangible assets used in the operations during the Period was assessed and valuation of long-term real estate has been performed. Other assets: Change of other assets during the Period mostly resulted from VAT deductions and movement of property taken over for debts: sale (the book value of the property amounted to EUR 1,800,000), newly foreclosed assets (for the amount of EUR 1,627,000) and recorded depreciations of assets taken over for debts (EUR 141,000). Financial assets: During the Period the Bank s investment into treasury papers issued by the Government of the Republic of Lithuania was redeemed, it nominal value was EUR 3,389,000, besides interest income on securities in the amount of EUR 166,000 was received, Snoras additionally accumulated interest income in the amount of EUR 26,000 for the Period. Report of the Bankruptcy Administrator to the Creditors of AB Bankas SNORAS (bankrupt) 10

11 5 Course of the bankruptcy process A summary of the progress achieved in each of the key areas of the bankruptcy is provided below. 5.1 Disposal of tangible assets Property sale procedure During the Period (on 28 April 2015) Snoras committee of creditors approved new rules for sale of Snoras assets, according to which assets are to be sold in four actions, except for the assets, which are subject to an exception according to a resolution of the committee of creditors. The rules say that when organisation of auctions is not possible or economically inefficient, subject to an approval of the committee of creditors, sale of assets can be organised by way of free sale under the procedure set in the rules for sale of Snoras assets. After the review of the property sale strategy, it was decided to refuse services of real estate sale intermediaries (brokers) for property sales in Lithuania. The contract with the Lithuanian office of Colliers was terminated. It will be the bankruptcy administrator and relevant employees of the Bank that will be in charge of all further sales of the Bank s property in Lithuania. In addition to the mandatory placement of information about property offered for sale by auction on the website of the Department of Enterprise Bankruptcy Management, information about the property for sale, irrespective of the manner it is offered for sale (by auction or by way of free sale), is published in all most popular real estate websites: aruodas.lt; skelbiu.lt; ntzemelapis.lt; plius.lt; domoplius.lt; snoras.com. In addition, the Bank sends information by to real estate investors and brokers, also announcements in the press are made and other means are used (e.g. leaflets about sale of parking spaces were distributed in the neighbourhood of the property for sale) Sold real estate owned by the Bank in Lithuania 10 real estate objects were offered for sale: Parking space at Laisvės pr. 77F, Vilnius; Apartment at Konstitucijos pr. 9-84, Vilnius; Land plot at Švitrigailos g. 1, Vilnius; Blocked house with a land plot at Pavasario g. 38A-2, Vilnius; Land plot at Juozapaičiai village, Šiauliai district municipality; Land plot at Samanynė village, Panevėžys sub-district; Land plot at Ąžuolų g. 5, Aukštelkė village, Šiauliai district municipality; Land plot at Blužgalis village, Šiauliai district municipality; Apartment at Subačiaus g. 115A-46A-1, Vilnius. The above-indicated objects were sold for the total amount of EUR 1,693, (the VAT incl.). Report of the Bankruptcy Administrator to the Creditors of AB Bankas SNORAS (bankrupt) 11

12 On 30 June 2015, Snoras owned 307 unsold items (complexes) of real estate (both foreclosed from debtors and possessed (used in operations) by the Bank historically) in Lithuania. On the said date, sale of 266 items was announced: an auction of 100 items was scheduled for 23 July 2015, an auction of 118 items was scheduled for 6 August 2015 and free sale of 48 objects was scheduled for 17 July items were not offered for sale as the Bank was waiting for payments for them according to results of previous auctions or free sales or because there were other objective, legal obstacles for their sale Real estate (property complexes) owned by the Bank abroad No property of the Bank located abroad was sold during the Period. Upon suggestion of the bankruptcy administrator, the committee of creditors reduced the initial sale prices of unsold property (a real estate complex consisting of agricultural land plots and mansion buildings) in Imastu village, Tapa parish, Lääne-Virumaa county, Estonia, also permitted to sell this property as separate land plots. It was decided to continue use of intermediaries services for sale of property located abroad. Given that property sale intermediaries were chosen a long time ago and the list of property for sale in Estonia has changed (properties owned by a subsidiary have been put on the list), it was decided to organise a new tender procedure for selection of intermediaries. At the end of the Period, a tender procedure for selection of property sale intermediaries in Estonia was completed, the contract was awarded to the Estonian company Colliers International Advisors OÜ. As a result of the tender procedure, the Bank managed to get better conditions for sale of property than those applied earlier Movable property No sales of movable property were performed during the Period, but the bankruptcy administrator continues to identify assets that have become surplus to the bank as the wind-down progresses. Usually, such assets include motor vehicles, IT equipment and office furniture. Attempts are made to value the assets that are no longer used in operations of the Bank as soon as possible and to sell them under the procedure set by legal acts and the committee of creditors. During the Period, valuation of 4 unused vehicles was ordered and performed, also proposals were received for valuation of the whole movable property, stocktaking of which has been performed (for valuation both of the entire property and its various parts). In light of the costs of such valuation, it was decided to select and involve property valuators for valuing only the most valuable property and to establish prices of the remaining property referring to prices of the last sale and/or prices of analogous property. Upon suggestion of the bankruptcy administrator, the committee of creditors approved prices of most both used and no longer used movable property (including long-term and current assets, as well as works of art) and the procedure of its sale. At the end of the Period, free sale of no longer used movable property was announced, which was completed already after the end of the Period (on 13 July 2015). During the Period, the work of vacating branches to be closed and moving the movable property to the central office was performed intensively. Also, valuation of 221 valuable objects of movable property was ordered and performed, however, the valuation report was submitted to the Bank only after the end of the Period. 5.2 Loans Income from loan repayments received during the Period amounts to EUR 6,166,000, whereas the income from interest and charges amounts to EUR 3,435,000. The composition and the net book value of the loan portfolio have not changed significantly during the Period and amounted to EUR 261,505,000 at the end of the Period. Report of the Bankruptcy Administrator to the Creditors of AB Bankas SNORAS (bankrupt) 12

13 During the Period the bankruptcy administrator continued negotiations for sale of the loan portfolio but there were no significant changes in the process. After the end of the Period, i.e. on 31 July 2015 the negotiations for sale of the loan portfolio were successfully completed and the Bank and UAB Baltijos Kredito Sprendimai signed an agreement for sale of the loan portfolio. The acquisition of the loan portfolio will be financed by a consortium of international investors, consisting of investment funds registered in Luxembourg and Deutsche Bank AG. The buyer of the portfolio was selected by way of a public auction that enabled to ensure the transparent sale process and, taking into consideration the situation in the market, to get a price offer that is best in the interests of the creditors of the bankrupt bank. The Bank s committee of creditors had set the minimum base price of EUR 169,685,000 for sale of the loan portfolio. The offer submitted by the consortium met this requirement and was recognised the best in the auction process. With regard to the terms and conditions of the sale agreement, the purchase price will be transferred to the Bank s account after the fulfilment of the requirements provided for in the agreement and receipt of regulatory permits necessary for the transaction. It is expected that the money will be transferred to the Bank s account within three months after the signature of the agreement but in any case no later than by 31 January Taking decisions on creditor claims and satisfaction of such claims / Determination and payment of creditor claims Approved claims As of 30 June 2015, the outstanding creditor claims to Snoras approved by the court amounted to EUR 1,327,874,000. The table below shows the quantity and the value of the approved claims as of 30 June 2015, less any amounts already paid to first and second ranking creditors: Priority ranking Quantity of approved claims Approved amount (EUR 000) , , , , ,346 Total amount 15,207 1,327, Litigation Civil claim against V. Antonovas and R. Baranauskas In May 2012, Snoras lodged a EUR 492 million statement of claim in the High Court of Justice Queen s Bench Division Commercial Court (the English court ) against V. Antonovas and R. Baranauskas. The English court issued the Worldwide Freezing Order, seizing assets of V. Antonovas worldwide. On 15 December 2013, the civil case against V. Antonovas and R. Baranauskas was suspended, pending decision in reply to the extradition application of the Republic of Lithuania. On 20 January 2014 the UK court took a decision favourable for the Republic of Lithuania, according to which V. Antonovas and R. Baranauskas should be extradited to Lithuania. V. Antonovas and R. Baranauskas appealed against this decision. Report of the Bankruptcy Administrator to the Creditors of AB Bankas SNORAS (bankrupt) 13

14 On 6 May 2015 the appellate court of Great Britain upheld the decision taken by the Westminster Magistrates Court in January 2014 to extradite V. Antonovas and R. Baranauskas to Lithuania. On 21 May 2015 V. Antonovas and R. Baranauskas filed applications for admission of their appeals against the court decision of 6 May 2015 to a higher court. At the beginning of July 2015 V. Antonovas and R. Baranauskas, in violation of the preventive measures imposed on them in the United Kingdom, left the territory of the United Kingdom. To the best knowledge of the bankruptcy administrator, V. Antonovas and R. Baranausko currently are in the territory of the Russian Federation. The team of the bankruptcy administrator analyses the impact of these circumstances on the process initiated in Great Britain and will take all necessary measures that may be required due to changes in circumstances. In spite of these processes, the Worldwide Freezing Order on V. Antonovas assets remains in force. On 23 July 2015, in a pre-trial investigation performed in Lithuania against the former shareholders and heads of the Bank, Snoras filed a civil claim for indemnification of property damage caused by criminal acts in the amount of EUR 487,052, Claim to Ernst & Young The committee of creditors of Snoras unanimously approved the conclusion of the settlement agreement by and between Snoras and UAB Ernst and Young Baltic ( EY ) on the financial conditions recommended by the bankruptcy administrator to the committee in the meeting held on 2 October Consequently, on 7 October 2014 Snoras and EY concluded the settlement agreement, whereby EY undertook to pay Snoras EUR 11.5 million from the date of coming into force of the ruling approving the settlement agreement. However, a number of minority creditors complained about the decision of the creditors committee of Snoras to the Vilnius Regional Court as far as it refers to the settlement agreement and the court imposed interim measures prohibiting Snoras to file the settlement agreement for approval pending the outcome of the proceedings. The said claim was rejected and Snoras filed the settlement agreement with the Vilnius City Local Court for approval. On 5 May 2015, the Vilnius City Local Court passed a ruling, which is not subject to appeal, whereby it approved the settlement agreement between Snoras and EY, according to which EY paid Snoras the amount of money indicated in the settlement agreement Switzerland The process of potential claims in Switzerland is continued, there have been no significant changes in the process in the Period. Report of the Bankruptcy Administrator to the Creditors of AB Bankas SNORAS (bankrupt) 14

15 AB Bankas SNORAS (bankrupt) A. Vivulskio g. 7 LT Vilnius Report of the Bankruptcy Administrator to the Creditors of AB Bankas SNORAS (bankrupt) 15