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Lehman Brothers Blocks U.K. Accounts of Russia's Unexim Bank and Inkombank
Lehman Blocks Accounts of Russia's Unexim, Inkombank (Update7) (Adds closing stock price in 13th paragraph.)
Moscow, Sept. 24 (Bloomberg) -- Lehman Brothers Holdings Inc. won a court order blocking the U.K. bank accounts of Inkombank and Unexim Bank, two of Russia's biggest banks, claiming they defaulted on obligations of more than $110 million.
Lehman claimed in documents filed in the High Court in London that Inkombank defaulted on an $87 million payment due on Sept. 11 and Unexim Bank defaulted on a $25.9 million payment the same day.
Lehman is among dozens of foreign private creditors, including Credit Suisse First Boston and Deutsche Bank AG, trying to salvage anything they can from investments that collapsed after the government defaulted on $40 billion of its debts in August. That left many Russian banks, the biggest holders of the government bonds, unable to meet their own obligations.
Inkombank said that Lehman's action ''can hardly be considered a rational way out of the present situation. Lehman Brothers is trying to use force to get ahead of other creditors and to be the first seizing everything it can.''
The Russian government's creditors also are trying to recover whatever they can. A delegation led by Deutsche Bank representing 17 foreign banks is meeting with the government in Moscow today. Russian officials said they're willing to offer new terms on its defaulted bonds, after first trying to force bondholders to accept payment of 10 percent or less.
Default Warning
Russian officials also warned today that the government could default on the next payment on its estimated $38 billion of debts to foreign creditor governments.
The debts owed by Russian banks to Lehman and other foreign banks were mainly in the form of currency forward contracts obliging Russian banks to deliver as much as $1.5 billion in exchange for rubles by Sept. 15. The collapse of the ruble left most unable to do so.
The government also imposed a 90-day moratorium barring banks and companies from paying foreign debts. ''The banks are in a desperate situation,'' said Max Gotbrod, a partner at U.S. law firm Baker & McKenzie, based in Moscow. ''They had their assets in government bonds, they were forced into a breach of contract, and if they do anything about it they will be fined by the central bank.''
Forward Contracts
Inkombank said it failed to cover currency forward contracts that came due Sept. 15 after the value of the ruble made the contracts too expensive. Inkombank also said it was prohibited from covering the contracts by the government's moratorium on foreign debt payments by Russian banks and companies. Inkombank refused to specify the amount of money on deposit in the U.K. accounts seized.
Unexim Bank refused to comment. A spokesman said the bank had received no official notification of the U.K. court action. Unexim Bank is Russia's fourth-largest private bank by assets; Inkombank is second-largest.
The majority of losses were Lehman's clients' funds, a Lehman official said. The losses to Lehman and the reserves set aside for those were included in Lehman's earnings reported yesterday.
Lehman Brothers yesterday reported third-quarter profit fell 23 percent from a year ago, as trading revenue plunged after losses in Russia and other emerging markets. Lehman, the fourth- largest U.S. securities firm by capital, said net income for the quarter ended Aug. 31 fell to $151 million, or $1.10 a diluted share, from $197 million, or $1.30 a share, in the same quarter last year. Its stock fell 4 3/16 today to 33 11/16 in New York.
The currency forward contracts obliged Inkombank to buy rubles from Lehman for dollars on Sept. 15 at a given exchange rate. Most large Russian banks hold the contracts, which were sold at an average exchange rate of 6.5 rubles per dollar. 'Unbearable'
On Sept. 15, the exchange rate was set at 8.67 to the dollar by the Russian central bank. Inkombank would have had to cover the difference. The ruble now has fallen about 60 percent against the dollar, and more currency forward contracts held by Russian banks will expire on Oct. 15. ''As a result of the uncontrolled plunge of the ruble, the sum of these obligations became unbearable for Russian banks and the Russian economy as a whole,'' Inkombank said. ''This problem is a global one which goes far beyond the framework of agreements of separate Russian banks and it should be decided on a wide international basis.''
Inkombank said it would be ''much more rational to solve questions of recovering debts on a multilateral basis. . . taking into consideration the interests of all creditors.''
The government and central bank last week appealed to foreign banks to refrain from suing or seizing assets of Russian companies abroad until talks could be held. ''We count on a responsible and constructive approach by all interested parties regarding the resolution of the issue of Russian bank foreign currency debt,'' the government said in a statement. ''Russia asks investors to refrain from legal action until mutually agreeable results are reached through negotiations.''
Vulnerable
Russian banks and companies with assets abroad will continue to be vulnerable to such seizures, said Gotbrod, who contributed to a study of the applicable laws published by Baker & McKenzie last week. The government's moratorium is not valid under foreign laws or even under Russian law, he said.
The moratorium was imposed by central bank directives, rather than new laws, Gotbrod said. Those directives cannot be imposed retroactively, affecting contracts already signed, he said. ''This is really changing the original contract and that can only be done by law,'' he said.
Gotbrod said he expected other court actions against Russian banks.
SBS-AGRO, Russia's largest private bank, said it's now in talks with about 20 Western banks about rescheduling its debts, though so far it has avoided legal action, said bank spokesman Eduard Krasnyansky. ''We have long been conducting conversations about restructuring our debt, and there was talk of freezing our accounts,'' Krasnyansky said. ''But there have been no concrete actions on this. It's a threat, but no one has informed us about the freezing of our accounts.''
SBS said it owes a total of $162 million to foreign creditors, though Krasnyansky said the bank hadn't defaulted because it was covered by the government's moratorium. |
