Lithuania to Seek Sale of Seized Ukio Bankas Within a Week

Ukio Bankas AB, Lithuania’s fourth-largest lender by deposits until its operations were suspended last week, will be sold to a rival, Lithuania’s central bank said.

The Bank of Lithuania decided today that Ukio’s administrator should sell it to Siauliu Bankas AB, as the least costly and fastest way to resolve the problems posed by the insolvent lender, central bank chief Vitas Vasiliauskas told reporters in Vilnius.

“We think negotiations should be concluded this week so that already next week we could talk about gradual renewal of operations,” the central banker said. This approach “would better protect the confidence of the shareholders in the stability and reliability of the banking system, as well as other public interests, rather than liquidation,” he said.

The Bank of Lithuania suspended Ukio’s activities Feb. 12 and appointed an administrator, saying the lender was insolvent after risky lending to related companies. Just over a year after the collapse of Snoras Bankas AB, the government is seeking to avoid another bankruptcy that would test the state deposit-insurance fund.

Successful transfer of Ukio’s assets, rights and liabilities to Siauliu Bankas, after removing the bad loans, would mean the insurance fund will only have to pay out about 800 million litai ($309 million), Vasiliauskas said. In case of bankruptcy, it would face charges of 2.7 billion litai, he said.

EBRD Backing

Siauliu, whose biggest shareholder is the European Bank for Reconstruction with a 19.6 percent stake, said last week that it had begun negotiations with Ukio’s administrator. At the same time, the EBRD said it was ready to provide subordinated debt to strengthen Siauliu for a deal on Ukio.

It was not clear whether Siauliu would agree to acquire any of the foreign assets that Ukio’s majority owner Vladimir Romanov, or companies related to him, had pledged to the bank as loan security, Vasiliauskas said. Those included assets related to Edinburgh soccer club Heart of Midlothian, the Birac AD alumina producer in Bosnia and Herzegovina, real estate in Moscow and other things, he said.

Unhealthy assets would be split off and, if recovered, distributed to Ukio creditors, the central banker said.

Temporary administrator Adomas Audickas’s report on Ukio found that the bank’s liabilities exceeded its assets by about 1.1 billion litai.

Independent Valuation

In order to proceed quickly, that preliminary estimate would be the basis for negotiations with Siauliu, Audickas told reporters at the same press conference. An independent appraiser would then value the property in detail, and any differences would be settled between the parties later, he said.

The Finasta investment banking unit of defunct Snoras Bankas, which the Lithuanian government took over in 2011, had also expressed interest in acquiring some of Ukio’s assets. As the offer was limited to specific parts of Ukio’s business, the central bank decided not to pursue negotiations, according to Vasiliauskas.