The loan guarantee
As told by two sources in the banking market, familiar with the state of Affairs in the troubled Bank, the financing from Alfa-Bank “Peresvet” drew about a year ago. The sum amounted to 5.4 billion rubles., the loan of steel purchased for securities and the Deposit from the “Relight”. In itself, this funding is not uncommon, but in this case, attention is drawn to the unusual details of the transaction: in particular, according to sources , the security Deposit is almost 100% covered for the size of the loan.
Traditionally, the amount of the security Deposit varies depending on credit quality and liquidity of pledged asset and typically last up to 50%. “The structure of the transaction, when in the presence of security in the form of securities, the borrower gives a hundred percent Deposit, raises serious questions about the real target nature of the transaction,” — said Vice-President of FBK Alexey Terekhov. “This is an unusual deal — he agrees to Treasurer of a large Bank. — I have not heard that the borrower is totally and not partially guaranteed loan, capping attract funding Deposit 100%.”
Peresvet have used a product of Alfa-Bank under the name of “Open forward” (presentation of this product is available). It gives the possibility to Alfa-Bank funding for the purchase of securities with leverage and with an obligation to repurchase.
Confirmation that the transaction was designed in the form of a forward contract with a security Deposit can be traced in the statements of the “Peresvet” in accordance with IFRS for the year 2015 and first half 2016: it confirms the existence deliverable forward contracts in the amount of about 5% security Deposit about the same amount. However, according to reporting contracts with securities “represent transactions with one Bank with a rating of BB+ from Fitch, as a result of which the Bank has an obligation to repurchase bills of exchange of third parties.” A rating of BB+ assigned to Alfa-Bank by Fitch in August 2015.
Thus, the number of securities, purchased by Alfa-Bank in the interests of “overexposure” were mostly “bill third party” (and, according to sources , in part the bonds of large issuers). According to sources , the promissory notes represented obligations of the borrowers of the “Peresvet”. “It was a little-known company, their papers are difficult to called liquid,” said one of the interlocutors . To raise funds for these securities, said one of the sources, the market would be problematic because “Peresvet” and was forced to agree to this very strict condition of Alfa-Bank, as almost one hundred percent Deposit.
The developments around the “Peresvet”
4 Oct Fitch ratings has published a report in which it was reported that about 12 billion rubles (6% of the total assets of the Bank, or 8.2% of the loan portfolio on October 1, 2016) of the Bank “Peresvet” are high-risk, as issued to borrowers, mostly with no real assets. According to Fitch, many of them showing signs of affiliation between themselves or with the management of the Bank. “The actual concentration and related-party lending may be higher than indicated in the statements. <…> The long-term sustainability of the business in doubt as Fitch”, — noted in the message of rating Agency. The Agency also pointed to the fact that the refinancing risk of the Bank may increase due to the active involvement of funds in the financial markets.
From 14 to 19 October, the Bank “Peresvet” has produced a bond issue with a total nominal value of 2 billion rubles. Investors in the placement have not purchased any bonds.
On 14 October, the TV channel “Rain” reported the disappearance of the Chairman of the Board and minority shareholder Alexander Shvets. Thus a press-service of the Bank reported that Alexander Shvets is on treatment in a medical facility.
On 18 October, the Bank “Peresvet” imposed a limit on the issuance of deposits in the amount of 100 thousand rubles.
On 21 October, the Bank of Russia has appointed the Bank “Peresvet” interim administration.
22 October, the representative of the press service of the Bank of Russia reported that the Bank’s problem, according to preliminary data, linked to taken by the Bank of high risk through active lending projects in the construction industry faced in recent years from a serious drop in demand. According to the prospectus of issue of Eurobonds up to 40% of its loan portfolio was accounted for by loans to construction companies.
Treasurer of a major Bank on condition of anonymity, said that about a year ago Peresvet have been asked to provide funding for their construction projects secured by promissory notes. “We refused the deal. It’s a risky business: in the event of a problem, not the fact that the owner will be able to repay the loan,” he said. Analyst at Moody’s Semyon Isakov indicates that the transaction financing on purchase of promissory notes are not common and are rare.
Alfa-Bank, however, argue that “the transaction was used promissory notes of companies with real assets (real estate in the form of land and buildings, estimated value exceeds the values of the bills, leading the actual construction)”.
The convenient scheme
The question is why he had used such a scheme. “A big plus of such transactions in the specifics of accounting: transactions and associated risks are not reflected on the balance sheet of the Bank-borrower”, — says senior Director of financial institutions ratings Agency Fitch Alexander Danilov. Thus, there is the opportunity to quietly for the Central Bank to Finance related companies and to avoid the accrual of reserves.
Another Fitch analyst Dmitry Vasilev does not exclude that the Bank “Peresvet” could use such a funding scheme related companies, in order not to violate the norm of N6 (set the maximum size of risk on one borrower or group of related borrowers not exceeding 25% of the capital). The maximum size of risk on one borrower or group of related borrowers on October 1, 2016 was “Peresvet”, according to official reports, of 20.2%.
Another version of the use of open forward made by the participants of the market: funds received by the companies that sold the promissory notes could then be injected into the capital of “overexposure” to bypass an outright ban on the capital increase of banks at the expense of borrowed funds. To monitor official statements, if this is impossible. However, the capital increase for “overexposure” was important to receive government support in the form of OFZ, say the bankers.
In any case, one hundred percent security Deposit allowed Alfa-Bank to repay the loan in full, while other creditors together with the Bank decide the fate of the “Peresvet”.
From a review of Alfa-Bank, submitted to the journal should be that in October, when the problem of “overexposure” were well known, Alfa-Bank demanded to fulfill the contractual obligations, that is to buy the paper. And since this was not done, he forcibly closed the deal by selling the mortgaged “Peresvet” bonds in the market and writing off in debt repayment of the Deposit. This was done after entering in the “Peresvet” of the interim administration. The bill, as explained in alpha Bank, has not been sold, remained on its balance sheet “at the highest received from participants of the market quotation”.
Taking into account the security Deposit and sold bonds Alfa-Bank “covered the whole debt, and the difference is 1 billion rubles was returned to the “closest distance”. Thus, the “Peresvet” and left without a Deposit and without securities. According to sources , the losses of the “Peresvet” from this operation in the form of written-off creditors Deposit are estimated more than 5 billion rubles.
This is a substantial loss for “overexposure” in the first half of 2016, he earned about 2.8 billion rubles of net profit under IFRS.
The press service of Alfa-Bank on Monday evening supplemented the earlier these comments with the following statement: “Before the termination of the transaction with “Peresvet”, its total amount was just over 9 billion rubles, of which the share of bills (covered in security Deposit 100%) was 52%. Liquid paper was coated with 20%. We tried to return the assets to the Bank, but after failure, all transactions were forcibly closed. Since the bonds were sold in the market more than initially estimated, a portion of the security Deposit in the amount of RUB 1 billion was returned to “Relight”. The transaction and all information on it (including primary documents) has been shown to representatives of the Central Bank. The Bank never received any comments from the Supervisory body”.
Interviewed experts accurately called the deal “an individual”. “A key criterion that can serve as collateral that requires lender — said Danilov. — If it is 70-80% or more of the cost of the acquired asset, then the transaction is likely is fiduciary in nature (formally covering the true purpose of the transaction. —) and do not have a real economic sense.”
Partner at Baker Tilly Russia Elena Dmitrieva more careful in the estimates. “As the situation on the interbank lending market difficult, in these circumstances, banks have to raise Finance using different schemes. A transaction may be a market, but we cannot exclude other factors,” she said. However, she raises questions of the complex structure of the transaction and the fact that Alfa-Bank has agreed to take the balance of illiquid promissory notes. Elena Dmitrieva does not rule out that Alfa Bank was personally interested in the business of builders, or simply asked to support their business. “Or “closest distance” was necessary to remove bills from the balance sheet and Alfa-Bank, most likely, realizing that the probability that the loan will not be refunded, transferred the paper to itself on balance with a maximum guarantee,” — said the expert.
“It seems that everything was done with full understanding on both sides. Therefore, Alfa-Bank’s secured itself, demanding 100% coverage of the promissory notes, — adds the head of practice of investment attraction of KSK Grupp Joel Lautier. — As for reputation, something about the alpha Bank it is known that he is involved in such a complex and risky deals that no other credit organizations”. Lotje added that he thinks from a legal point of view or from the point of view of possible claims by the regulator for Alfa-Bank can be some consequences.
The situation may be changed a bankruptcy, if the license of the “Peresvet” will be withdrawn. “In accordance with article 61.2 of the law on bankruptcy, the arbitration court can be challenged by suspicious transactions of the debtor. Under this category are transactions in which the observed unequal counter-performance of the obligations of the other party to the transaction and the transaction committed in order to harm to property rights of creditors,” — said the Chairman of inter-regional arbitration court of Moscow and Moscow region the lawyer Oleg Sukhov. He points out that the arbitration court can be challenged and transactions entailing the provision of preference to one of creditors before others. According to him, even the possibility of reorganization of the Bank is not an obstacle for disputing transactions.
The Central Bank, appointed in Peresvet temporary administration, declined to comment.