“Oschadbank calls on ARMA to take a statesmanlike approach during the tender for the manager of the Gulliver shopping center – bank representative

At a meeting with representatives of the Asset Recovery and Management Agency regarding the tender for the selection of a manager for the Gulliver shopping center, Oschadbank emphasized the need to adhere to the state’s position, not just in the formal execution of court decisions. ARMA representatives promised to revise the regulations to allow payments to creditor banks to be included in the management costs. This was stated by Arsen Miliutin, Deputy Chairman of the Bank’s Board in charge of NPL, in an exclusive commentary to UNN following the meeting.

Details

On November 13, under pressure from the media and the public, ARMA representatives decided to meet with a representative of Oschadbank to discuss the issue of ensuring the interests of the state bank in the tender for the selection of a manager for the Gulliver shopping center, whose building is a collateral for a mortgage loan. However, as reported by the Asset Recovery and Management Agency, the meeting failed to reach a consensus and the parties agreed to “continue cooperation”.

Arsen Miliutin said that at the meeting, each party explained its position on the Gulliver case. He, as a representative of Oschadbank, did not demand any changes to the tender documentation, but emphasized the “extremely negative financial situation” under the loan if it is not serviced as a result of the transfer of the mall to a third party. 

This is a significant violation of the rights of creditors, which was emphasized, among other things, at a meeting of the Verkhovna Rada Committee on Investment. The same opinion is expressed by the independent directors on the Supervisory Board of Oschadbank

He explained that according to the legislation governing ARMA’s activities, all revenues from ARMA’s asset management are transferred to the state budget. 

“The formula is as follows: the revenues received from the management of a particular facility are used to cover the costs of managing the facility and payments to the manager, and the rest goes to the state budget. In other words, creditors will not receive funds to repay the loan debt from the management of the asset by ARMA. This interpretation of the law was also shared by ARMA representatives during the meeting,” said the bank’s deputy chairman.

However, according to Oschadbank, the state’s position in this situation should be to “ensure a positive investment climate, protect the interests of creditors and observe fiscal interests, and not just to formally enforce court rulings”. 

However, the current development of the situation suggests something quite different: the cash flow will not be directed either to creditors, who have all rights to it, or to repay the tax debt, which the bank debtor is actually accused of. By the way, as far as we know, the amount of potential tax interest is about 133 times less than the amount of creditors’ claims. We will all see how much the state budget will receive from the management of the “material evidence” (as Gulliver is qualified in the court ruling) based on the results of the manager’s activities. Finally, the interest of the consortium of state-owned banks is that the costs of managing the facility should include payments to state-owned banks in an amount not less than that envisaged by the financial models for this facility

According to him, as a result of the meeting, ARMA representatives promised to once again examine in detail the relevant regulations for the possibility of including payments to creditor banks in management costs. 

“If this is not possible, then, as we have previously stated, Oschadbank and another co-creditor, Ukreximbank, will have the right under the mortgage law to satisfy their claims at the expense of the mortgaged property (Gulliver) primarily before other creditors of the debtor, including external managers. The management right will be subject to termination as a lower priority right. The banks also retain the right to sell the right to claim under the loan and collateral agreements,” the bank representative added.

Recall

On October 30, ARMA announced a competition to select a manager for the Gulliver shopping center. The head of the agency, Olena Duma, proudly stated that she had taken the strictest possible approach to the selection of a manager for this high-profile asset and even set the maximum possible 4 criteria for candidates. However, among the criteria set by ARMA, there is no mention of the need to pay off the mortgage loan. 

Oshchadbank has repeatedly stated that the decision to transfer Gulliver to ARMA harms the interests of the state-owned bank, as it will deprive it of loan payments from the company that owns the capital’s complex .The loss of income by Oschadbank due to the suspension of loan payments could reach more than UAH 20 billion.

After the announcement of the tender, Arsen Miliutin, deputy chairman of the board of Oschadbank in charge of NPLs, said in a commentary to UNN that the state-owned bank plans to recover the building of the capital’s Gulliver shopping center in its favor if ARMA transfers it to management. He expressed indignation that instead of paying the loan to state banks, Gulliver’s earnings would be given to an “incomprehensible manager”.

Only after that, and under public pressure, did ARMA representatives decide to meet with Arsen Miliutin, the deputy chairman of the Oschadbank board responsible for NPLs.