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Paritate consults creditors after insolvency hearing

  • 2001-07-26
  • Nick Coleman
RIGA - Following a petition by the Bank of Latvia, Paritate Bank was declared insolvent on July 17 by the Riga District Court. The bank's court-appointed administrator, Lauris Liepa, is now putting together a rescue package.

"The rehabilitation of Paritate is possible," he said.

Gints Pranevskis, an official with the Finance and Capital Markets Commission, said that in addition to incurring losses on the U.S. stock market, Paritate also lost money as a result of lending to offshore companies, which had only put up securities as guarantees.

The court heard that the bank had more than 10,000 creditors, around 100 of whom had "large" claims. Most live abroad and conducted transactions via the Internet.

Liepa said he is discussing the bank's rescue with them. One option is for creditors to receive shares in the bank in exchange for the money they are owed.

"We would expect most to agree to this - receiving something is better than nothing."

The rescue scenario is also being discussed with a well-known auditing firm, he added. It will be presented to the Finance and Capital Markets Commission on August 17.

Commenting on the liquidation, Roberts Idelsons, managing director of the brokerage firm Suprema, said rehabilitating Paritate might be possible. "Liepa is pretty knowledgeable and will take this assignment seriously.

"Considering it is a fairly small bank and the losses are not that huge it could, possibly, be saved. But the issue is, if creditors do allow what they are owed to be capitalized, will they be able to sell those shares later? Would anyone want to buy them?"

Paritate's insolvency is effective as of June 26, the day after the Bank of Latvia stopped it from carrying out transactions. On June 22 its losses reached 5.78 million lats ($9.01 million) and its liabilities exceeded assets by 2.83 million lats.

At the end of May, Paritate was the 17th largest of Latvia's 22 banks in terms of assets.