Parex ends syndicated loan debacle

  • 2011-05-11
  • From wire reports

RIGA - Parex Bank on May 3 made its last syndicated loan payment, paying back 164 million lats (234.2 million euros) to its lenders, said the bank’s spokeswoman Marita Ozolina-Tumanovska, reports news agency LETA. The bank repaid the loan with its own funds, without drawing any money from the state budget, stressed Ozolina-Tumanovska, adding that the key obligations of Parex Bank have been honored at no cost to the state budget.

Parex CEO Christopher Gwilliam says he is pleased with the job done by the bank’s team, taking into account the complicated fiscal situation in the country and the difficult political decisions that are to be made by the government regarding budget consolidation. The bank has been able to fully repay its syndicated loans, and this was done at no cost to the state budget and taxpayers.

International financial market players also watched closely whether the bank would be able to settle its liabilities on its own, and considered this fact an important indicator of Latvia’s economic recovery.
The repayment of the syndicated loan on time, without any state aid, is a positive signal to foreign investors and rating agencies. It proves gradual economic recovery of Latvia and the correctness of the strategy chosen for tackling problems in the banking sector, said Gwilliam.

According to Parex Bank’s restructuring plan, it was able to repay the syndicated loan by restructuring non-performing loans and selling securities, said Ozolina-Tumanovska. She went on to say that, thanks to a cautious strategy, Parex has been able to avoid selling its assets at “inadequately low” prices.

Gwilliam said that the bank’s employees, the Financial and Capital Market Commission, Finance Ministry and State Treasury have cooperated with the bank and helped it overcome many problems that had initially seemed “insurmountable.” The bank has successfully implemented its first important task, he added.

Minority shareholders, however, take a different view on current bank activities. The Bank of Latvia is doing everything possible so that the state would lose its investment in the Parex Bank bailout, Parex Bank minority shareholder, Filips Rajevskis, said. He points out that the Bank of Latvia did not support the transfer of Parex Bank assets to a new bank, and, by not freeing Parex from obligatory reserve requirements, is now trying to prove that it was right.

Rajevskis believes that the restructuring of Parex was wrong, and the bank’s bad assets should have been transferred to a fund. However, the termination of Parex’s license in order to free the bank from obligatory reserve requirements would only increase the state and minority shareholders’ losses.

The minority shareholder then pointed out that revoking Parex Bank’s license, which is an important asset on its own, will even further reduce the bank’s value and emphasized that the minority shareholders are not interested in the bank’s insolvency or liquidation process.

Parex, which was broken up in August 2010, posted 163.9 million lats in audited losses last year, according to the bank’s audited annual report submitted to Nasdaq OMX Riga. In 2009, Parex’ losses amounted to 111.1 million lats.
In compliance with the International Financial Reporting Standards, Parex established reserves in the amount of 115.7 million lats for non-secure loans in 2010. The adjustment affected the bank’s financial indicators, the report states.

As of Dec. 31, 2010, the loan portfolio of Parex and the concern amounted to 566.3 million lats and 541.6 million lats, respectively; total assets - 789.3 million lats and 792.1 million lats, respectively. The amount of capital and reserves reached 36.9 million lats and 37.3 million lats at end-2010.