At that time, the Bank of Estonia found that EVEA Pank was undercapitalized and was unable to meet its obligations.
The central bank's decision took EVEA Pank's management by surprise. Most said the bank should not have been closed down.
Margus Tilga, chairman of the board of EVEA Pank, said that if a strategic investor is found before the court hearing, the bank will be saved.
"It is important to have positive equity. If the bank restarts operations, the share capital should exceed 5 million ecus, or about 78 million kroons ($5.85 million), the requirement set by the Bank of Estonia," Tilda said. "For the time being we need 250 million kroons. This includes $9 million for increasing the owners' equity and the rest to guarantee liquidity."
The Tallinn City Court has already postponed the hearing from Jan. 6 until Jan. 21 because the banks' representatives wanted to see the report on the banks' financial situation, prepapred by court-appointed experts PricewaterhouseCoopers and KPMG Estonia.
The experts found that EVEA Pank should revise the value of its Russian debt securities maturing in 2001 and downsize it to 34.25 percent of their face value. The experts also concluded that the securities maturing in 2007, which are worth 56 million kroons, should be written off the bank's balance.
Another bank headache is to postpone paying 227 million kroons to creditors. This sum includes 97 million kroons paid by the Estonian Deposit Protection Fund to EVEA Pank's clients, 70 million kroons used to cover deposits of clients who agreed to postpone their claim for a year, and a 60 milllion kroon debt to the state budget.
The Deposit Protection Fund started paying out compensations a month after the bankruptcy proceedings started. Eighty-seven percent of the 20,700 clients whose deposits were compensated were private investors.
This accumulated debt does not seem to worry the bank's management and it calmly predicts that private clients would abandon the bank.
"When the bank restarts its activities, we predict that 70 percent of the deposits are leaving. These are mostly private persons," said Tilga. The bank has held talks with several investors and Tilga claims that there are some candidates who are ready to take a risk and join them.
"We are continuing negotiations with all of them. For an investor EVEA Pank is presently not a bank but an institution without a licence. Today's situation is not clear for them. Until today, none of them has been capable of taking the first step because of the uncertainty of the long run strategic investment," said Tilga.
The expected court decision on EVEA Pank will influence the fate of ERA Pank which is under a moratorium.