REPORT OF THE BANKRUPTCY ADMINISTRATOR

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1 REPORT OF THE BANKRUPTCY ADMINISTRATOR TO THE CREDITORS OF AKCINĖ BENDROVĖ BANKAS SNORAS (BANKRUPT) FOR THE PERIOD ENDING 30 SEPTEMBER April 2016 Vilnius

2 DISCLAIMER UAB Valnetas, the bankruptcy administrator of akcinė bendrovė bankas SNORAS, has prepared this 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 September 2015, except for cases when this report expressly indicates otherwise. Given the ongoing investigations and possible revision of the information and data contained in the report, the information provided in this report should not be regarded as definitive or conclusive and may be subject to further review, supplement and adjustment by the bankruptcy administrator. No representation, warranty or other commitment is given in respect of the accuracy and completeness of the information contained in this report. No party may rely on the contents of this report or the information contained in it, whatever the purpose of its use. 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. 2

3 TABLE OF CONTENTS AND USED ABBREVIATIONS Table of contents Introduction...4 Key events and results of the Period...5 Income...6 Property sales during the Period...7 Operational payments...8 Non-operating expenses...9 Payments to creditors...10 Assets of the Bank...11 Administration report of the Bank...12 Litigation (I)...13 Litigation (II)...14 Abbreviations used in the Report Report This report prepared by the bankruptcy administrator in order to inform the creditors of AB Bankas Snoras (bankrupt) about the progress of the bankruptcy procedure and to ensure transparency of the process. Bankruptcy Administrator or BA Snoras or Bank UAB Valnetas (private limited liability company), legal entity code , registered office at Kęstučio g. 58-3, Kaunas. Akcinė bendrovė bankas SNORAS (bankrupt), legal entity code , registered office at A. Vivulskio g. 7, Vilnius. Period Reporting period from 1 July 2015 to 30 September VP Securities 3

4 INTRODUCTION Period Website Background key events This Report to the creditors of Snoras was prepared as a follow-up of the report on events that occurred until 30 June 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 July 2015 to 30 September Periodic updates and publications of information relevant to the creditors of Snoras are available on Snoras website at On 16 November 2011, the Bank of Lithuania suspended the activities of Snoras; On 24 November 2011, the Bank of Lithuania passed a resolution on initiating bankruptcy proceedings regarding the bank s insolvency; On 7 December 2011, the Vilnius Regional Court passed a ruling on initiating bankruptcy proceedings against Snoras. Pursuant to this ruling, Neil Hunter Cooper was appointed the bankruptcy administrator of the Bank; On 22 August 2012, the Vilnius Regional Court passed a ruling whereby Snoras was declared bankrupt and to be liquidated; the ruling of the Vilnius Regional Court came into force on 30 August 2012; On 28 October 2014, the Vilnius Regional Court passed a ruling approving the resignation of Snoras bankruptcy administrator, Neil Hunter Cooper, as the bankruptcy administrator, and appointing UAB Valnetas as new bankruptcy administrator of Snoras. The 28 October 2014 ruling of the Vilnius Regional Court came into force on 5 November Upon coming into force of the ruling, UAB Valnetas took over the functions of Snoras bankruptcy administrator. 4

5 KEY EVENTS AND RESULTS OF THE PERIOD AREA OF ACTIVITY Assets Litigation Administration Payments to creditors EVENTS AND RESULTS On 31 July 2015, the Bankruptcy Administrator and UAB Baltijos Kredito Sprendimai signed Snoras loan portfolio sale agreement. 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. Currently the parties are preparing for the closing, i.e. the closing conditions under the loan portfolio sale agreement are being implemented, including obtaining clearance from the Competition Council and preparing for the transfer of electronic data; During the Period, the process of sale of the corporate and retail loans portfolio (consisting of 25 loans issued mostly to clients in Russia and secured by real property located in Russia) was started. The carrying amount of the portfolio as on 31 August 2015 was approximately EUR 140 million, but the vast majority of loans are problem loans which are the subject of the proceedings pending before Russian courts; During the Period, the reorganisation of two subsidiaries, UAB Snoro Valda and UAB Snoras Distressed Assets, was completed. Currently the case against V. Antonovas and A. Baranauskas is suspended in Great Britain, but the Worldwide Freezing Order is still valid. V. Antonovas and A. Baranauskas escape should not affect the course of the case pending in Great Britain, however it may aggravate the pre-trial investigation ongoing in Lithuania. After the sale of the loan portfolio, the decrease of the number of employees by 43% is expected, which will lead to reduction in the payroll fund by approximately EUR 81,000 per month; Bank s management structure remains unchanged. The amount of EUR 20 million was paid to the second ranking creditor during the Period. 5

INCOME EUR 000 Total as of 31 December 2013 Total as of 31 December 2014 QI 2015* QII 2015 During the Period Income From the start of the bankruptcy process till the end of the Period Rental income

6 INCOME EUR 000 Total as of 31 December 2013 Total as of 31 December 2014 QI 2015* QII 2015 During the Period Income From the start of the bankruptcy process till the end of the Period Rental income 2,228 2, ,519 Interest on VP (securities) and on cash balances held 3,728 8, ,594 Interest on loans and charges 42,454 54,331 2,731 3,435 2,974 63,471 Total income 48,410 64,738 3,170 3,644 3,034 74,584 Disposal of assets 17,63% 60,10% 0,41% 21,82% 0,03% Loan repayments 264, ,561 7,776 6,166 8, ,693 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 2,403 38,679 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 22,927 13, ,398 Income structure during the Period Rental income Interest of loans and charges Interest of securities and on cash balances held Loans repayments Fixed assets and other assets 6

7 PROPERTY SALES DURING THE PERIOD Real property sold during the Period Land plot with unfinished structures at Aukštelkės village, Šiauliai district Agricultural land plot at Airėnai II village, Vilnius district Premises of Bank s branch at J. Basanavičiaus a. 15, Marijampolė Premises of Bank s branch at Maironio g. 12, Utena Commercial premises at Krivių g. 5, Vilnius Apartment at Kuosų g , Klaipėda Recreation premises at Kalno g. 24A, Neringa Detached house at Kuosų g. 14B-3, Vilnius Premises of Bank s branch at Vytauto g. 60C, Tauragė Premises of Bank s branch at Pulko g. 14, Alytus Commercial premises at Kareivių g. 19, Vilnius Library premises at M. K. Čiurlionio g. 78, Druskininkai Premises of Bank s branch at Laisvės g. 13-2, Mažeikiai Apartment at Gaono g. 8-10, Vilnius Production and administrative premises at Jankiškių g. 39, Vilnius Movable property sold during the Period Sale price (EUR) 655 movable objects 19,352 5 paintings 11,620 During the Period, 15 real property objects at the total price of EUR 2,366,001 were sold. The process of real property sale is continuing. The list of objects to be offered for sale is constantly updated with assets no longer necessary in Snoras activity. During the Period, real estate agents were hired in Estonia, procurement of real estate agent services was carried out in France. 7

OPERATIONAL PAYMENTS EUR 000 Operating expenses From the start of the bankrupt cy till 31-12-2012 2013 2014 QI 2015* QII 2015 During the Period Total from the start of the bankruptcy process

8 OPERATIONAL PAYMENTS EUR 000 Operating expenses From the start of the bankrupt cy till QI 2015* QII 2015 During the Period Total from the start of the bankruptcy process Personnel 9,794 3,975 3, ,269 Premises 2, ,328 Assets 1, ,087 Communicatio ns and IT 2,572 1,707 1, ,049 Security and insurance ,271 Other expenses ,029 Total operating expenses 17,348 7,824 6,484 1,236 1, ,034 * Financial data provided until the end of 2014 were estimated or recorded on a cash basis. From 2015, financial information contained in the Report has been estimated on an accrual basis, i.e. expenses are recognised in the period to which they relate regardless of when the payment is made. EUR Decrease of Bank s operating cost QI, 2015 QII, 2015 During the Period Operating expenses 990 After the optimisation of the administrative structure of the Bank by the Bankruptcy Administrator, Bank s operating expenses have been decreasing continuously. During the Period, such expenses decreased by more than 21%. 8

NON-OPERATING EXPENSES EUR 000 From the start of the bankruptcy process till 31-12-2012 2013 2014 QI 2015* QII 2015 During the Period Total from the start of the bankruptcy process 30000 28076

9 NON-OPERATING EXPENSES EUR 000 From the start of the bankruptcy process till QI 2015* QII 2015 During the Period Total from the start of the bankruptcy process Nonoperating expenses Expenses for consultants and BA 28,076 12,674 7,432 1, ,261 EUR It should be noted that expenses for consultants and the Bankruptcy Administrator have been decreasing Average quarterly expenses for consultants and the Bankruptcy Administrator from the start of Snoras bankruptcy process till 2013 were EUR 6,479,000, in 2013 EUR 3,169,000, and in 2014 EUR 1,858,000, while in 2015 expenses for consultants and the Bankruptcy Administrator amounted to EUR 1,026,000 on average per quarter and decreased by 6.3 times from the start of Snoras bankruptcy process. 0 From the start of the bankruptcy process till Average during the quarter, 2013 Average during the quarter, 2013 QI, 2015 QII, 2015 During the Period Expenses for consultants and BA 9

10 PAYMENTS TO CREDITORS EUR 000 Payments to first ranking creditors Išyments to second ranking creditors Total payments to creditors From the start of the bankruptcy process till QI 2015 QII 2015 During the Period Total from the start of the bankruptcy process 2, , , ,114 30,000 20,000 20, ,721 2, , ,114 30,000 20,000 20, ,432 During the Period, EUR 20 million were paid to the second ranking creditor. From the beginning of 2015 till the end of the Period, teh total amount paid to the second ranking creditor is EUR 70 million. At the end of the Period, VĮ Indėlių ir Investicijų Draudimas with the second ranking financial claim constituting 37.84% of the total approved financial claims was the largest creditor of the Bank. Claim settlement ranking order Total amount Quantity of approved claims Approved outstanding amount (EUR 000) , ,666 16, , ,346 16,106 1,307,874 10

ASSETS OF THE BANK The net carrying value of Snoras remaining assets as on 30 September 2015 following a review of recent provisions: Asset groups 7 December 2011 31 December 2014 31 March 2015 30

11 ASSETS OF THE BANK The net carrying value of Snoras remaining assets as on 30 September 2015 following a review of recent provisions: Asset groups 7 December December March June September 2015 Total assets (EUR 000): 1,133, % 377, % 339, % 330, % 312, % Cash and cash equivalents: 253,253 22% 39,984 11% 18,024 5% 18,622 6% 10,259 3% cash in accounts 201,874 18% 26,340 7% 9,591 3% 13,718 4% 5,333 2% other financial investments 51,379 5% 13,644 4% 8,433 2% 4,904 1% 4,926 2% Loan portfolio 745,371 66% 286,948 76% 270,581 80% 261,505 79% 253,445 81% Investments in subsidiaries 1,987 0% 174 0% 174 0% 174 0% 174 0% Real estate 127,415 11% 42,863 11% 42,826 13% 41,860 13% 40,222 13% Other assets 5,354 1% 7,153 2% 7,569 2% 8,765 2% 8,410 3% It is expected to complete the sale of the key loan portfolio by the end of November Invitation to tender was published for the sale of a package of creditor claims with a carrying value of EUR million. At the end of the Period, the Bank has 298 real property objects, of which 210 units are offered for free sale, and 9 objects are put up for auction. 0% 13% 3% 3% 81% Cash and cash equivalents Loan portfolio Investments in subsidiaries Real estate Other assets Assets of the Bank during the Period 11

12 ADMINISTRATION REPORT OF THE BANK At the end of the Period, Snoras had 82 employees. The decrease during the Period is 3 employees. It is planned that after the sale of the Bank s loan portfolio there will be personnel in the Bank, i.e. a reduction in the number of employees by 43% is expected, which will lead to reduction in the payroll fund by approximately EUR 81,000 per month. The remaining employees of the Bank will continue to fulfil the following functions. Department Functions of departament employees Creditors management and administration of remaining loans, communication with debtors; drafting of procedural documents; property valuation and drafting of property valuation reports, drafting of reports and other documents related to the status of remaining loans and debtors, valuation of the status of remaining loans, calculation of provisions, etc. Finance preparation and monitoring of the budget of the Bank s activities, other plans, management of cash flows, accounting of economic and financial operations of the Bank, implementation and control of assignments, comprehensive accounting of the Bank s assets, drafting of related reports; tax calculation and declaration, drafting of periodic and other financial reports on demand; provision of other financial information to all interested parties, accounting of wages and salaries and related payments, collection of revenues, etc. Administration provision of office services, provision of translation services, drafting of responses to inquiries of law enforcement and state authorities; administration and management of the Bank s archive; provision of information by phone; representation of the Bank in courts and in different types of disputes, analysis of different legal problems related to the bankruptcy process against the Bank, drafting and review of credit, credit-related, lease, services, etc. agreements, provision of legal opinions, etc. Asset Management management, supervision, administration and accounting of movable and immovable assets of the Bank; takeover, supervision and administration of assets of the Bank s debtors, organisation of sales of movable assets and control of implementation of such sales; ensuring of utilities for the Bank and the functioning of fixed communications systems, their maintenance and repair; administration, support and ensuring of the functioning of the information system, etc. 12

13 LITIGATION (I) The Bankruptcy Administrator aims at satisfying creditors claims to the fullest extent possible within the shortest feasible time interval and therefore: (i) in order to minimise the risk of asset loss, actively participates in the proceedings where a party is seeing to avoid the queue of creditors of the Bank for award of funds from Snoras; (ii) conducts cases in accordance with the principles of process concentration, economy and cooperation; (iii) acts exclusively in the interest of Snoras. Information of the cases conducted by the Bank as on 30 September 2015 in the Republic of Lithuania is provided in the table below. The information contained in the table does not include Snoras disputes regarding compensation for damage from former shareholders of the Bank, former shareholders and related persons, recovery of loans, processes beyond the jurisdiction of the Republic of Lithuania, disputes related to the sold Snoras loan portfolio and processes against banks and other companies operating in foreign jurisdictions. Types of disputes (by substance) / description of consequences Number of cases, units Cases regarding deposit certificate and bond agreements 575 Cases regarding contesting financial claims 10 Cases regarding overpaid deposit insurance payments / awarding of funds under statements of claim of the Deposit 8 Insurance Fund Claims for repayment of funds in extrajudicial bankruptcy procedures (according to deposit accounts, financial 6 collateral arrangements, etc.) Cases regarding recognition of persons as bank depositors and/or awarding of insurance payments 4 Cases regarding awarding of damage (damages) 9 Cases regarding rights in rem for release of security, modification, allocation 3 Cases regarding recovery of debts (including awarding of damage, refund of advance payments) 4 Cases regarding completion of unfinished payments and refunds 2 Other cases (regarding establishment of legal facts, etc.) 4 13

14 LITIGATION (II) Civil action against V. Antonovas and A. Baranauskas In May 2012, Snoras brought a statement of claim to the Commercial Court of the Queen s Bench Division of the High Court of Justice (U.K.) (amount of the claim: LTL 1,698.8 million (EUR 492 million)) against V. Antonovas and R. Baranauskas. On 15 June 2012, the English Court passed the Worldwide Freezing Order, attaching the shareholders assets worldwide. The case was stayed on 15 December 2013; The case was not resumed during the Period, but the Worldwide Freezing Order remains in effect. Enforcement from V. Antonovas and A. Baranauskas assets in Great Britain On the initiative of the Bankruptcy Administrator, English courts recognised the judgements of Lithuanian courts regarding the recovery of loans from the former shareholders and their related persons; the sale of the assets of relevant persons is pending in the recovery process. Switzerland The Bankruptcy Administrator, in cooperation with Swiss pre-trial investigation authorities, is continuing to collect evidence and assess the possibility of making claims against third parties requiring compensation for damages. 14

REPORT OF THE BANKRUPTCY ADMINISTRATOR

REPORT OF THE BANKRUPTCY ADMINISTRATOR TO THE CREDITORS OF AKCINĖ BENDROVĖ BANKAS SNORAS (BANKRUPT) FOR THE PERIOD ENDING 31 DECEMBER 2015 8 April 2016 Vilnius TABLE OF CONTENTS AND USED ABBREVIATIONS