Opportunities for constructive dialogue between the debtor and the creditor
The need for a positive solution to the issue of “frozen” debt and close to Ukrainian government and business have spoken regularly over several years. However, practical steps were not taken. Periodic commercial auctions with prohibitive market conditions only aggravated the situation.
In the end a solution was found. Major financial institutions of the country – the national Bank jointly with the Deposit Guarantee Fund initiated a Dutch auction. This bargaining model differs from the classic that starts with a maximum amount and is on the decline to the price that agrees to pay the first interested buyer. A distinct advantage of these auctions is that the lots, which for years could not implement standard mechanisms to find their buyers. This decision from the category of win-win, because the winners are all parties to the process. The buyer gets the lot at a good price (discount in such cases is as high as 60-70%), the seller comes out of these troubled assets, the state is launching a new market-based mechanisms, informs enovosty.com/news.
Judging by the events of recent months, it is definitely a positive signal to the market players – promising objects are transferred to the new owners, who will obviously turn them into profitable assets.
Promotes this practice and to resolve the longstanding issues of credit obligations. It opens up opportunities for a constructive dialogue between the debtor and the creditor. Given that these lots are sold at a large discount, the parties have broad opportunities for mutually beneficial agreements. Since the beginning of 2019, the market has already felt the effectiveness of the Dutch auctions from leading financial institutions in the country. One of the biggest events was the sale of shopping Mall Respublika, which was in the process of trading, 2017, January 2019, the Deposit guarantee Fund has sold the right of claim to collateral in the form of the SEC for 777 million hryvnia (discount 70% from initial cost of 2.59 bln.). Now the object readily at the level of 80% will be completed and put in operation that will definitely enliven the retail market and significantly increase the cost of the asset.
In February, the same mechanism was sold claim rights under a collateral loan companies LLC “Zolotyi Ekvator” and the WFP “VC NEX” before the Bank “Forum” (with the bail 32 filling stations of network WOG). The Bank, which is in the process of liquidation in 2014, had a large portfolio of bad debts. And if the Bank’s liabilities to depositors were covered from the funds of the Deposit guarantee Fund, the requirements for loans were pledged to the Fund. Their implementation may partially balance the financial consequences.
As a result of trading debt in the amount of 1.76 billion (with Deposit – 32 filling stations of the network) was sold for 404,9 million. The discount on this transaction amounted to 77%.
These precedents 2019 demonstrate the important role of state regulation in dealing with issues of repayment of debt obligations of troubled banks by sale of the collateral. This is undoubtedly positive for the market practice helps to develop a constructive dialogue between the parties, to give impetus to the market development, strengthen the role of public financial institutions and to infuse fresh cash flow in the financial sector (in this case SCF).
Perhaps 2019 will be the year to break the deadlock for many hitherto problematic mortgage facilities.