Zolfo Cooper
Report of the Bankruptcy
Administrator to the
Creditors of Akcinė
Bendrovė Bankas Snoras
(bankrupt) for the period
ending 30 September
2014
November 2014
Report of the Bankruptcy Administrator to the Creditors of Akcinė Bendrovė Bankas Snoras (bankrupt)
Contents
1 Introduction ....................................................................................................... 1
2 Executive summary ............................................................................................... 2
2.1 Key events and milestones achieved in the nine months to 30 September 2014 ........... 2
2.2 Significant events since 30 September 2014 ...................................................... 3
2.3 Future strategy and next steps ...................................................................... 4
3 Income and expenses ............................................................................................ 6
3.1 Income ................................................................................................... 6
3.2 Expenses and distributions to creditors ............................................................ 8
4 Operational review ............................................................................................. 10
4.1 Size and shape staff review ........................................................................ 10
4.2 Branch network ....................................................................................... 10
4.3 Other operating costs ................................................................................ 10
4.4 Operating budget ..................................................................................... 11
4.5 Assets remaining to be realised .................................................................... 12
5 Progress with the bankruptcy ................................................................................ 13
5.1 Tangible asset realisations.......................................................................... 13
5.2 Loans ................................................................................................... 15
5.3 Determination and payment of creditor claims ................................................. 15
5.4 Litigation ............................................................................................... 18
5.5 Sale of subsidiaries ................................................................................... 19
5.6 Bankruptcy Administrator procurement process ................................................ 20
6 Next steps ........................................................................................................ 21
Disclaimer:
This report is prepared by the Bankruptcy Administrator of Akcinė bendrovė bankas Snoras (Snoras) pursuant to the request
made by the creditors’ committee appointed by resolution of the first creditors’ meeting dated 12 June 2012 (the
Committee).
The information contained in this report is principally based on the information and investigations undertaken by the
Bankruptcy Administrator as at 30 September 2014.
Given the ongoing investigations and review, the information in this report should not be regarded as definitive or conclusive
and may be subject to further review by the Bankruptcy Administrator. No representation, warranty or other commitment is
given in respect of the accuracy and completeness of the information in this report. No party may rely on the contents of this
report or the information contained within it and Snoras, the Bankruptcy Administrator and their respective employees
agents, advisers and the Committee shall not be responsible or liable for the information contained in this report or for
reliance by any party on it.
Please note that figures in this report may include minor rounding differences.
Report of the Bankruptcy Administrator to the Creditors of Akcinė Bendrovė Bankas Snoras (bankrupt) 1
1 Introduction
This report to the creditors includes a summary of financial information and activities in the
bankruptcy for the nine month period to 30 September 2014 (the Period).
There remain a significant number of issues to be resolved in the bankruptcy. The amounts
estimated to be paid to creditors will ultimately be determined by:
the overall amount of money recovered by the Bankruptcy Administrator from the
assets of Snoras;
the amount and ranking of approved claims of creditors in the Snoras bankruptcy; and
the costs incurred in the bankruptcy process.
Report of the Bankruptcy Administrator to the Creditors of Akcinė Bendrovė Bankas Snoras (bankrupt) 2
2 Executive summary
2.1 Key events and milestones achieved in the nine months to 30 September
2014
The keys events and work carried out in the bankruptcy in the Period are summarised as
follows:
Realisations
• Gross receipts in the bankruptcy to the end of the Period stand at LTL 2.4 billion,
LTL 522.7 million of which was received in the Period.
• Total loan servicing receipts (cash interest and principal repayments) since
appointment amount to over LTL 1.3 billion, of which LTL 240.7 million relates to the
Period.
• The Bankruptcy Administrator continues to work closely with the Committee and real
estate agents to determine the optimum strategy to realise the Bank’s portfolio of
owned and foreclosed properties (the Properties). The Properties in Lithuania, Latvia
and Estonia are being sold through a process of public forced auctions in accordance
with the laws of Lithuania. The Properties in other jurisdictions are being sold by free
sale. As at the end of the Period, the sale of 58 properties had been agreed for a total
value of LTL 94.3 million.
• The initial stage in respect of the loan book sale was completed in January 2014 and
second stage bids from shortlisted investors were received in June 2014. Following
further negotiations, improved bids were received, assessed against other options and
presented to the Creditors’ Committee in early September. Negotiations with the
leading consortium continued through into October.
• Negotiations were progressed with the three bidders interested in the purchase of the
Finasta Banking Group (Finasta) all of whom applied to the Bank of Lithuania for
approval and subsequently received clearance. Final offers from all investors were
received in September.
• The Bankruptcy Administrator secured and recognised LTL 187.9 million of funds which
were held in Finasta in respect of the unissued shares. This followed the ruling of the
Supreme Court that the funds received in respect of the unissued shares were the
property of the bankruptcy estate.
Litigation
• The Bankruptcy Administrator is investigating legal claims with a potential litigation
value overall of approximately LTL 2.4 billion. Some of these claims overlap however,
and at this stage the level of eventual recoveries remains uncertain.
• A significant volume of work has been undertaken to investigate the movement of funds
in relation to the alleged misappropriation of large sums by the former shareholders.
This has included obtaining a World-Wide Freezing Order on assets to a maximum value
of LTL 1.7 billion owned by one of the former shareholders. The proceedings have been
stayed in London due to the extradition hearing of Messrs Antonov and Baranauskas. The
World-Wide Freezing Order remains in place and the Bankruptcy Administrator awaits
the result of this hearing.
Report of the Bankruptcy Administrator to the Creditors of Akcinė Bendrovė Bankas Snoras (bankrupt) 3
• The Bankruptcy Administrator continues to make substantial progress with claims
against potential defendants in Switzerland in relation to alleged misappropriated
assets. The value of these claims is estimated at LTL 1.6 billion.
• The Bankruptcy Administrator was successful in obtaining two judgments, one against
Mr Baranauskas and the other against Mr V Antonov, Ms O Jampolskaja, Mr A Antonov
and Ms T Antonova. The awards amounted to a total of LTL 24.8 million. The
enforcement options available in this regard are being considered.
Creditors
• Over 29,500 claim requests have been submitted and, having reviewed and processed
them, 18,557 creditor claims have been approved by the court with a total value of LTL
6.8 billion. All remaining first ranking claims have been finalised and paid.
• Distributions to the second ranking creditor during the Period amount to LTL 1.4 billion,
in line with the second, third and fourth payment plans agreed by the court. The total
amount distributed to the second rank creditor to the end of the Period was LTL 1.7
billion.
Operational review
• The Bankruptcy Administrator continues to review employee requirements on a periodic
basis. Total employee numbers have been reduced over a number of phases from 1,397
at the start of the bankruptcy to 123 at the end of the Period.
2.2 Significant events since 30 September 2014
Agreement of the Committee on 4 November 2014 to negotiate a definitive sale
agreement for the loan book.
Agreement of the Committee on 23 October 2014 to the sale of the Finasta Banking
Group to Invalda LT.
At a meeting of the Committee on 2 October 2014, on the recommendation of the
Bankruptcy Administrator, the Committee resolved to approve the conclusion of a
settlement agreement with Ernst & Young Baltic regarding the audit negligence claim
of the Bank. A creditor has appealed against this decision.
At a meeting of the Committee on 16 October 2014 the Committee resolved to accept
the resignation of Neil Cooper as Bankruptcy Administrator and to apply to the court
regarding his resignation.
At a meeting of the Committee on 16 October 2014 the Committee resolved to ask the
court to appoint UAB Valnetas (responsible person Gintaras Adomonis) as the new
Bankruptcy Administrator of the Bank.
Report of the Bankruptcy Administrator to the Creditors of Akcinė Bendrovė Bankas Snoras (bankrupt) 4
2.3 Future strategy and next steps
The table below summarises the strategy by key workstream.
Workstream Future strategy
• Tangible asset
realisations:
Bank owned
properties
• The Bank owned 25 properties, including four located overseas.
The properties in Lithuania include the branch network.
• As at 30 September 2014, ten of the non-branch properties in
Lithuania had been sold for a total realisation of
LTL 11.0 million. The two unsold properties continue to be
marketed for sale by the Bank’s real estate agents.
• The Bank’s branch network comprises ten properties; nine of
which are owned, including the head office in Vilnius. On 31 July
2014 the branch in Utena closed. This property will be
independently valued and included in a future forced auction.
• The Bankruptcy Administrator continues to review the
requirements of the regional network as part of the overall
bankruptcy strategy. As branches become surplus to
requirements they will be closed and offered for sale in future
auctions. This is closely linked to the decision on the sale of the
loan book.
• The four overseas properties are located in France, Latvia (x2)
and Ukraine. During the Period, the sale of the two properties in
Latvia was agreed; the sale of one property had completed
before the end of the Period and the sale of the second property
is expected to be completed by 30 November 2014.
• At the time of preparing this report, the sale of the property in
Ukraine had been agreed but not completed. The property in
France remains unsold and continues to be marketed for sale by
our real estate agents.
Foreclosed
properties
• Foreclosed properties in Lithuania continue to be sold via public
forced auctions in line with the laws of Lithuania. Any properties
which remain unsold after the second forced auction are sold
through a free sale process.
• The number of foreclosed properties increases periodically in
line with the Bank’s policy with regard to underperforming and
terminated secured loan agreements. All newly foreclosed
properties are independently valued and offered for sale to the
public at forced auctions.
• Foreign foreclosed properties are sold in accordance with the
laws of Lithuania where possible or commercially practicable to
do so. Where this is not possible, the property is sold in line with
the best practice for the relevant country.
Report of the Bankruptcy Administrator to the Creditors of Akcinė Bendrovė Bankas Snoras (bankrupt) 5
Workstream Future strategy
Moveable assets
• As the Bank’s activities are wound down, moveable assets in the
branch network and head office become surplus to
requirements. These assets are transferred periodically to a
central location and sold via public auctions.
• The auction results are continually monitored to ensure the
process is maximising the return to creditors.
• Other moveable assets include motor vehicles which are sold
through professional auction channels as they become surplus to
requirements.
Loans
• Following the agreement to the sale of the loan portfolio, a
definitive agreement and transfer plan is being negotiated with
the investor consortium.
• In the meantime, the loan portfolio is being actively managed to
achieve the forecast level of collections and manage default
rates.
Determination and
payment of
creditor claims
• The Bankruptcy Administrator will continue to register and
review new claims, reconcile insured creditor claims with the
DIF claim, expedite disputed claims handling with the court and
review unissued share claims following the ruling in relation to
the Finasta funds.
• The Bankruptcy Administrator will continue to liaise with the in-
house legal team and instructed legal advisors in relation to the
referral to the European Court of Justice of Deposit Certificate
and Bond claims.
Litigation
• The Bankruptcy Administrator will continue to review the
strength of all litigation claims on a regular basis and pursue
only those with a strong prospect of an overall net recovery to
creditors.
Sale of subsidiaries • It is expected that the sale of Finasta will be completed during
the fourth quarter.
Other
• The Committee resolved to accept the Bankruptcy Administrator
Neil Cooper’s resignation at a meeting on 16 October 2014.
• The Committee has finalised the process of selecting the new
Bankruptcy Administrator and the court approved the
appointment of UAB Valnetas (responsible person Gintaras
Adomonis) as the replacement Bankruptcy Administrator on 28
October 2014, becoming effective on 5 November 2014 on expiry
of the period for lodging separate appeals.
Report of the Bankruptcy Administrator to the Creditors of Akcinė Bendrovė Bankas Snoras (bankrupt) 6
3 Income and expenses
3.1 Income
The table below shows the breakdown of cash receipts in the Period, together with the
cumulative receipts since the start of the bankruptcy.
LTL 000
Cumulative to
31 Dec 13
3 month period
Jan 14 – Mar 14
3 month period
Apr 14 – Jun 14
3 month period
Jul 14 – Sep 14
9 month period
Jan 14 - Sep 14
Cumulative to
30 Sep 14
Income
Rental income 7,694 95 159 154 408 8,102
Interest received on securities and on cash balances held
12,872 2,836 2,523 9,064 14,423 27,296
Loan interest and charges 146,584 11,280 9,904 9,607 30,791 177,375
Total income 167,150 14,211 12,586 18,825 45,622 212,772
Asset realisations
Loan repayments 913,059 41,264 85,521 83,109 209,894 1,122,953
Funds held by financial institutions
563,604 111 185,984 1,851 187,945 751,549
Financial assets 193,942 776 571 458 1,805 195,747
Investments in subsidiaries 17,596 - - - - 17,596
Fixed assets, investments and other assets
17,591 13,269 25,111 41,680 80,060 97,651
Cayman loan repayments (transferred from frozen account)
37,489 (2,596) - - (2,596) 34,893
Litigation costs awards 894 - - - - 894
Total cash receipts 1,911,325 67,036 309,773 145,922 522,731 2,434,056
Points to note regarding the income in the Period are as follows:
Rental income
Rent totalling LTL 0.4 million was received in the Period. Total rental income collected
since the appointment of the Bankruptcy Administrator is LTL 8.1 million.
As stated in the report to 30 June 2013, Krajbanka gave formal notice to the Bankruptcy
Administrator of their intention to exit the property in Riga and subsequently exited the
property on 20 June 2013. From this date rental income decreased significantly. Colliers
Latvia was appointed to market the property for sale, and a sale was completed on
5 September 2014.
Interest received on securities and cash balances held
Since the appointment of the Bankruptcy Administrator LTL 27.3 million has been received,
of which LTL 14.4 million has been collected in the Period. This amount includes interest
from securities, term deposits, deposit accounts and realised profit made from the sale of
securities.
Report of the Bankruptcy Administrator to the Creditors of Akcinė Bendrovė Bankas Snoras (bankrupt) 7
Loan repayments
Funds totalling LTL 209.9 million were received in the Period from loan repayments and
refinancings.
In addition to the realisations detailed above, asset foreclosures of LTL 5.3 million were
exercised on terminated loans (seized collateral). Residual permitted set-off and foreign
exchange movements of LTL 2.3 million, discussed further in Section 4.5, impacted the
balance sheet value of the loan book also.
Total loan income received since the date of appointment of the Bankruptcy Administrator
is over LTL 1.3 billion.
Funds held by financial institutions
Funds totalling LTL 186.1 million were recognised in the six months to 30 June 2014
following the Supreme Court ruling that funds held in Finasta Bank relating to unissued
shares in Snoras are a realisation of the bankruptcy. The balance of LTL 1.9 million was
recognised in July following an Appeal Court ruling.
Financial assets
Income received for the Period from financial assets held by the Bank pre-bankruptcy
totalled LTL 1.8 million.
Fixed assets, investments and other assets
Total income from the sale of fixed assets, investments and other assets in the Period was
LTL 80.0 million. This included proceeds from sale of the Bank’s real estate of
LTL 79.2 million, comprising LTL 36.0 million in respect of foreclosed assets and LTL
43.1 million in respect of Bank owned properties. Funds received from the sale of motor
vehicles and other moveable assets in the Period were LTL 0.9 million.
Total income received from the sale of fixed assets, investments and other assets since the
date of appointment of the Bankruptcy Administrator total LTL 97.7 million.
Cayman loans
The payment of LTL 2.6 million made in the Period relates to the final release of escrowed
settlement costs.
Please note that receipts collected after April 2013 in relation to Cayman loans are included
within overall loan repayments and interest as shown in the Income table.
Report of the Bankruptcy Administrator to the Creditors of Akcinė Bendrovė Bankas Snoras (bankrupt) 8
3.2 Expenses and distributions to creditors
Payments during the Period totalled LTL 1.4 billion (including VAT), including
LTL 17.5 million of operating expenses, LTL 20.8 million of professional fees, and
distributions to creditors of LTL 1.4 billion.
The table below summarises payments for the Period, together with cumulative costs since
the start of the bankruptcy:
LTL 000
Cumulative to
31 Dec 13
3 month period
Jan 14 - Mar 14
3 month period
Apr 14 - Jun 14
3 month period
Jul 14 – Sep 14
9 month period
Jan 14 - Sep 14
Cumulative to
30 Sep 14
Operating expenses
Personnel 47,539 3,732 3,106 2,361 9,198 56,737
Premises 10,665 926 742 722 2,390 13,055
Assets 7,930 380 417 496 1,293 9,223
Communication and IT 14,775 1,032 1,125 658 2,815 17,590
Security and insurance 3,547 184 124 132 440 3,988
Other expenses 2,457 467 622 266 1,355 3,812
Total operating expenses 86,913 6,720 6136 4,636 17,491 104,404
Non-operating expenses
Professional fees and disbursements
140,702 5,884 6,796 8,146 20,826 161,528
Other payments 42,398 2,106 - - 2,106 44,503
Total non-operating expenses 183,100 7,989 6,796 8,146 22,931 206,031
Payments to creditors
Payments to first ranking creditors
9,362 - - - - 9,362
Payments to second ranking creditors
375,000 500,000 50,000 800,000 1,350,000 1,725,000
Total payment to creditors 384,362 500,000 50,000 800,000 1,350,000 1,734,362
Total payments 654,374 514,709 62,931 812,782 1,390,422 2,044,797
The Bankruptcy Administrator is focussed on continually improving the cost effectiveness of
the Bank’s operations and reviews all costs on a regular basis in order to identify savings
that can be achieved.
Professional costs incurred in progressing the bankruptcy and maximising recoveries for
creditors are reviewed on a monthly basis, together with the Committee, to ensure value
for money is achieved and costs are kept as low as possible.
Additional detail in relation to the recent operating expenses is provided in Section 4 of this
report.
Non-operating expenses paid in the Period are summarised as follows:
• Professional fees and disbursements: professional costs of LTL 20.8 million were paid in
the Period in relation to the bankruptcy.
It should be noted that professional fees and disbursements paid within the Period do
not represent payments of fees incurred in nine month period to 30 September 2014.
The majority of payments due in respect of professional fees and disbursements have
Report of the Bankruptcy Administrator to the Creditors of Akcinė Bendrovė Bankas Snoras (bankrupt) 9
been made for fees incurred prior to 30 June 2014. The delay represents the time taken
to complete all necessary reports and seek approval from the Committee, and allow
lodging of the Committee minutes at court.
• Payments to creditors: further distributions of LTL 1.4 billion were made to the second
ranking creditor in the Period. Total distributions to the first and second ranking
creditors amount to LTL 1.7 billion.
• Other payments: the court decreed that LTL 2.1 million of funds held in bailiff escrow
accounts did not belong to the bankruptcy estate and that the sums must be paid to the
bailiffs.
Report of the Bankruptcy Administrator to the Creditors of Akcinė Bendrovė Bankas Snoras (bankrupt) 10
4 Operational review
4.1 Size and shape staff review
The Bankruptcy Administrator reviews the Bank’s staffing level on a regular basis to align
staff numbers and costs with the objectives of the bankruptcy.
The employees are on fixed term contracts of varying lengths. The employees were
categorised based on their role and the Bankruptcy Administrator’s requirements. The
employee contracts in each category had different end dates. As part of each size and shape
review, the Bankruptcy Administrator identifies which employee contracts to extend or to
allow to expire.
Three further size and shape reviews were undertaken during the Period, the final one of
which was implemented on 30 September 2014. At the end of the Period, 123 (115 FTE)
staff were employed. The contract end dates for all staff retained after this date have been
aligned to 31 January 2015.
The number of staff who have left the Bank since the start of the bankruptcy is 1,274. This
amounts to a reduction in the overall workforce of 91%.
4.2 Branch network
The Bank’s branch network comprises ten properties; nine of which are owned, including
the head office in Vilnius, and one leased. The branches remain in use to facilitate the
collection of outstanding loans and to provide a point of contact for the Bank’s loan
customers. On 31 July 2014 the branch at Utena was closed as a result of the last employee
leaving voluntarily. The operations of this branch have subsequently been relocated to
Vilnius. The remaining branches all remained in daily use at the end of the Period.
The Bankruptcy Administrator regularly reviews the requirements for the branch network,
balancing the recoveries from the loan portfolio against the costs of retaining the network.
A further review will be conducted once a timetable and any transitional arrangements for
the sale of the loan book has been finalised.
4.3 Other operating costs
4.3.1 IT systems and contracts
The Bank’s IT system is an integral part of managing the bankruptcy efficiently. The
Bankruptcy Administrator regularly reviews IT requirements and the total cost of the IT
department and implements changes where possible to reduce costs. This includes changing
suppliers where possible or renegotiating existing contracts in line with the Bank’s reduced
data consumption. Since the start of the year, a total of 14 IT related contracts have been
terminated or amended in line with the Bank’s reduced data requirements. This has
generated cumulative savings of approximately LTL 75,000 per month.
As IT contracts come up for renewal, the Bank manages the procurement of the ongoing
service through a tender process. This ensures that the Bank obtains a competitive price for
the IT services it consumes.
Report of the Bankruptcy Administrator to the Creditors of Akcinė Bendrovė Bankas Snoras (bankrupt) 11
In line with all other companies in Lithuania, the Bank is preparing for the adoption of the
EURO currency on 1 January 2015. During the Period, The Bankruptcy Administrator
successfully negotiated a contract with an IT supplier to undertake this project, which
commenced on 1 July 2014.
4.3.2 Premises, assets, security and insurance
These costs are linked to the number of assets owned by the Bank, with reductions driven
by disposals. Premises, security and insurance costs are linked to the number of properties
held by the Bank and fluctuate in line with the number of foreclosed properties under the
Bank’s control at any one time. Other costs are influenced by the loan portfolio
administration activity and include bailiffs’ expenses and enforcement costs.
4.4 Operating budget
By the request of the Bankruptcy Administrator, the Committee approved operating budgets
totalling LTL 20.1 million for the Period. The actual costs incurred in the Period totalled
LTL 18.1 million; this included payment of personnel costs which were accrued in the
previous period, timing differences in personnel tax payments and accrual for costs incurred
in the Period to be paid in the future. The table below summarises the costs incurred
relating solely to the budget period, with a favourable variance to budget of LTL 2 million.
LTL 000 Actual Budget Difference
Operating expenses
Personnel 9,924 10,245 (321)
Premises 2,390 2,849 (459)
Assets 1,306 1,722 (416)
Communication and IT 2,996 3,308 (312)
Security and insurance 440 452 (11)
Other expenses 1,068 1,553 (485)
Total 18,123 20,127 (2,004)
The principal differences between budgeted and actual costs are summarised below:
• Personnel: personnel costs are lower than budgeted due to overall cost savings made
through faster than planned headcount reduction.
• Premises: tax payments relating to Bank owned properties in Russia are yet to be
resolved due to a prolonged court process in Russia. In addition, real estate costs were
less than anticipated in the Period due to a lower volume of foreclosed asset seizures
and savings in fuel costs due to a milder winter than forecast.
• Assets: total costs were lower than expected in the Period as asset recovery expenses
were less than forecast due to a reduced number of foreclosed asset cases in the
period.
• Communication and IT: cost savings have been achieved in data communications and IT
system costs as a result of renegotiated contracts with suppliers.
• Security and insurance: costs are lower than budgeted due to reducing insurance costs
in line with continued realisation of the Bank’s assets.
Report of the Bankruptcy Administrator to the Creditors of Akcinė Bendrovė Bankas Snoras (bankrupt) 12
• Other expenses: costs are lower than budgeted due a timing difference in forecast sales
commission, primarily relating to the property sale in Riga. The sales commission was
paid in the next quarter.
4.5 Assets remaining to be realised
The table below shows the net book value of Snoras’ remaining assets, following a recent review of the provisions:
LTL millions Position at 31 Dec 13 Position at 30 Sep 14
Loans 1,342 1,045
Fixed assets 118 66
Other assets 168 135
Financial assets 720 73
Investments in group companies 1 1
Intangible assets - -
Totals 2,349 1,319
The material provisions and realisations in the current Period are detailed below:
• Loans: during the Period capital and interest payments of LTL 240.7 million were
received and LTL 5.3 million of foreclosed assets were recovered. The balance sheet
amount was further decreased by LTL 95.1 million due to change of other net
movements (foreign exchange movements and set-offs) and loan impairments of
LTL 11.2 million. This was partly offset by a LTL 55.1 million increase in accrued
interest. The movement has resulted in a net balance sheet reduction of
LTL 297.2 million in the Period.
• Fixed assets: the reduction in the balance sheet value of fixed assets is predominately
the result of the sale of assets.
• Other assets: the decrease is due to the sale of LTL 38.3 million of foreclosed assets;
whilst LTL 5.6 million (including additional costs) of foreclosed assets were brought in
during the Period.
• Financial assets: during the Period financial assets have decreased due to the sale of
matured bonds.
It should be noted that the realisable value of Snoras’ assets remains subject to change,
particularly in relation to the final recovery from the loan book, the sale of subsidiaries and
realisations from the property portfolio and other tangible assets.
In addition to the tangible assets noted above, Snoras has the potential to recover
significant value through a number of litigation claims which are currently in progress.
These claims are discussed further in the next section.
Report of the Bankruptcy Administrator to the Creditors of Akcinė Bendrovė Bankas Snoras (bankrupt) 13
5 Progress with the bankruptcy
A summary of the progress achieved in each of the key areas of the bankruptcy is provided
below.
5.1 Tangible asset realisations
An update in relation to the various asset categories is provided below.
5.1.1 Bank owned property
The sale of the Bank owned properties in Lithuania is being managed by Colliers
International (Colliers) and details of all unsold properties available can be inspected on
Colliers’ website (www.colliers.lt/PropertySearch).
The overseas Bank owned properties are located in France, Latvia and Ukraine and are
being marketed for sale by Colliers or their regional affiliate. Where possible, the foreign
properties are being sold in accordance with the laws of Lithuania or those of the relevant
jurisdiction. The Bankruptcy Administrator continues regularly to review the sale strategy
with the real estate agents and the Committee.
During the Period, the sale of seven Bank owned properties located in Lithuania was
completed; these were sold for a combined realisation of LTL 10.7 million. In addition, one
of the properties in Latvia was sold for LTL 36.3 million.
As at 30 September 2014, the total number of Bank owned properties sold was ten (the sale
of two had been agreed during 2013).
The property located in Ukraine is owned by a subsidiary company of the Bank, which once
sold will be used to repay an outstanding loan to the Bank. The sale of this property is being
coordinated by the Bankruptcy Administrator on behalf of the subsidiary company and is
managed locally by Colliers. The property is under offer and it is hoped to complete a sale
shortly.
The sale of the second property in Latvia was agreed after the end of the Period and is
expected to complete by 30 November 2014.
The unsold property in France will continue being marketed for sale.
5.1.2 Foreclosed assets: less than LTL 1 million each
The total number of foreclosed properties for sale fluctuates as properties are sold and
newly foreclosed assets are added to the portfolio. The new properties are grouped
together in batches to be sold at the forced auctions.
The first batch (Batch One) comprised 131 properties located in Lithuania valued at less
than LTL 1 million each. The auction process for Batch One commenced in July 2013.
During the Period, a second batch of 142 foreclosed assets (Batch Two) was added to the
auction process. The sale of 19 properties was agreed for a combined realisation of
LTL 4.7 million. This included five foreign foreclosed properties for a combined sum of
LTL 2.4 million.
Report of the Bankruptcy Administrator to the Creditors of Akcinė Bendrovė Bankas Snoras (bankrupt) 14
Cash receipts in the Period totalled LTL 5.1 million, of which LTL 370,729 related to sales
agreed in 2013. In addition, LTL 37,350 related to amounts received on sales that were
agreed but subsequently cancelled by the purchaser. Under the terms of the forced
auctions, these sums can be retained as abort fees.
The remaining unsold properties continue to be marketed by Colliers and offered for sale at
forced auctions and in the free sales, in accordance with the policy approved by the
Committee.
5.1.3 Foreclosed assets: greater than LTL 1 million each
The Bank has 13 foreclosed properties independently valued at more than LTL 1 million
each, and a series of forced auctions were held between December 2013 and January 2014.
During the Period, the sale of three properties located in Lithuania was completed for a
total realisation of LTL 9.1 million. In addition, one foreign property was sold for
LTL 14.9 million.
Batch Two, referred to above, added four properties to this category which will be included
in the forced auction process in the fourth quarter of 2014.
Cash receipts during the Period totalled LTL 30.9 million, comprising of LTL 9.1 million from
the sale of three properties located in Lithuania, LTL 14.9 million from one foreign property
and LTL 6.9 million received in relation to sales agreed in 2013.
The Bankruptcy Administrator regularly reviews the sale strategy for the unsold properties
with the local real estate agents in line with market activity in the region to ensure
maximum value is being obtained for the benefit of the creditors.
The remaining unsold foreign foreclosed properties are located in Estonia (three) and Russia
(two). The properties in Estonia comprise residential and office accommodation and are
now being sold via the free sale process in accordance with the Sales Policy.
The foreclosed properties in Russia comprise a motel complex and commercial premises.
The properties are being marketed by Colliers in Moscow to be sold by private tender,
which is a more appropriate method of sale for this type of property. At the time of
preparing this report, an offer had been accepted on the commercial premises, with the
sale expected to complete by the end of December 2014. No offer has yet been received on
the motel complex.
5.1.4 Moveable assets
As previously reported, the Bankruptcy Administrator continues to identify assets that have
become surplus to the Bank’s requirements as the wind down of the Bank’s operations
progresses. These assets include motor vehicles, IT equipment and office furniture.
The assets are being sold via weekly auctions at the Bank’s head office, or via specialist
third party agents (in the case of the motor vehicles). All of the assets offered for sale are
advertised ahead of the relevant auction on the Bank’s website (www.snoras.com).
In addition to the moveable assets owned by the Bank, a quantity of residential and office
furniture has been acquired from foreclosed assets where the former occupier has vacated
the premises and failed to remove their belongings. Primarily the Bankruptcy Administrator
attempts to sell the furniture together with the foreclosed property. Where this is not
Report of the Bankruptcy Administrator to the Creditors of Akcinė Bendrovė Bankas Snoras (bankrupt) 15
possible (ie where the purchaser insists on acquiring an empty property), the items are
removed from the premises and included in the weekly auctions.
Included in the Bank’s assets was a Spyker motor car which had been the subject of
litigation between the Bank and Spyker Automobielen B.V (Spyker). EUR 80,000 was
received in June 2014.
Total cash receipts for the sale of moveable assets and artwork (see below) in the Period
was LTL 0.9 million.
5.1.5 Artwork
The Bank owned 27 paintings by various artists (the Artwork). The Artwork was
professionally valued by three independent valuers. In addition, the Bankruptcy
Administrator consulted with local art dealers and gallery owners in Vilnius and the wider
area to identify the most appropriate way to sell the Artwork.
The public auction was held on Thursday 29 May 2014 and a total of four pieces were sold
for a combined sum of LTL 14,650.
A second auction has been arranged for 27 November 2014. Any person interested in
acquiring any pieces can record their interest via the Bank’s website.
5.2 Loans
Regular loan servicing income has decreased from LTL 253.6 million from the prior nine
month period to 31 December 2013 to LTL 240.7 million in the Period. Asset foreclosures
during the Period amounted to LTL 5.3 million.
As previously reported, in October 2013 it was decided in conjunction with the Committee
to initiate an exploratory sale process in relation to the Bank’s largely Lithuanian retail and
corporate loan portfolio (the Portfolio). Following a tender process, the Bankruptcy
Administrator engaged Zolfo Cooper Capital Management (ZCCM) to act as the sales agent
to perform and manage the sales process of the Portfolio.
The Bankruptcy Administrator completed the first phase of the sale of the Portfolio in
January with four bidders progressing to the next phase. This was completed in June 2014
with binding offers submitted by three potential investors. Further negotiations were
undertaken resulting in improved offers being submitted and presented to the Committee in
September 2014.
A decision to go ahead and negotiate a definitive sale agreement with the selected investor
was finally taken on 4 November 2014.
5.3 Determination and payment of creditor claims
As at 30 September 2014, there were 28 disputed claims to be determined by the First
Instance Court, the Court of Appeal or the Supreme Court. The majority of these claims still
await settlement dates from the Court.
In order to assist the court with this process the Bankruptcy Administrator provided written
explanations to the court for all the remaining disputed claims. The court is reviewing this
information to ascertain whether there is a need to hold a court hearing with the
Report of the Bankruptcy Administrator to the Creditors of Akcinė Bendrovė Bankas Snoras (bankrupt) 16
participation of all parties, or whether judgment can be passed based on the written
explanations provided. The Bankruptcy Administrator is waiting for the court’s ruling in this
regard.
There have been various hearings and certain key developments during the Period,
including:
• VĮ Indėlių ir investicijų draudimas (DIF): DIF’s current agreed claim is LTL 4 billion.
During the Period, distributions to the DIF totalling LTL 1.4billon were made in line with
the second, third and fourth court approved plans. A total of LTL 1.7 billion has been
distributed to the DIF.
In late December 2013 and January 2014, two appeals were lodged with the Supreme
Court with regard to the Court of Appeal’s ruling of 9 October 2013 in respect of the DIF
claim ranking. Both applications also included a request that the matter be referred to
the European Court of Justice for consideration of the implementation of two European
Directives.
On 20 June 2014, the Supreme Court issued a ruling confirming the ruling of the Court
of Appeals ie the Supreme Court rejected cassation claims and left the DIF claim as a
2nd ranking claim and the claims of Sodra and VMI as third ranking claims. Additionally,
the Supreme Court refused a request to refer the issue of claim rankings to the
European Court of Justice.
• Rights issue claim: following the ruling of the Supreme Court on 2 October 2013, and
upon receiving legal advice, the Bankruptcy Administrator recognised that the funds
held in Finasta in respect of the unissued shares are realisations of the bankruptcy.
A number of creditors made an initial claim in the Bankruptcy, many of which were
acknowledged as approved by the court on 22 March 2012. Subsequent to the approval,
the creditors then made an application to have their claims withdrawn, on the basis
that they wanted to pursue and properly argue their civil claims to acknowledge them
as owner of the funds that have been invested.
At that time, the court held over this issue, pending the outcome of the civil
proceedings. Following the outcome of those civil proceedings, the creditors may lodge
claims in the bankruptcy case. The court requested that the Bankruptcy Administrator
contact the representatives of these creditors to confirm that they wish for their claims
to be approved in the bankruptcy case. This has been done but the court has postponed
a decision in relation to these claims based upon the further application made to the
court by the Creditors concerned in respect of recognition of funds paid by them as
deposits, details of which are provided below.
Subsequent to this, a request was made to the court to renew the process in the share
issue case. Responses were provided and the request of the claimants was dismissed.
Following the filing of an appeal by the claimants, the Court of Appeal upheld the ruling
of the Court of the First Instance on 25 September 2014.
5.3.1 Share issues
Following the ruling in relation to the rights issue as noted above, the Bankruptcy
Administrator received new claims from 262 of those rights issue investors asking the court
to recognise them as depositors of Snoras so that they may claim deposit insurance.
Initial responses were filed by the Bankruptcy Administrator, DIF and the Bank of Lithuania.
Additional pleadings were subsequently submitted by the claimants and the Bankruptcy
Administrator.
Report of the Bankruptcy Administrator to the Creditors of Akcinė Bendrovė Bankas Snoras (bankrupt) 17
The claim was rejected by the ruling of the court on 29 September 2014.
An additional 33 claimants filed a further request to the court asking for their claims to be
accepted as deposits. Responses have been filed and the court hearing is scheduled for
26 January 2015.
5.3.2 Deposit certificates and bonds
On 16 December 2013, following a hearing on 14 November 2013, the Supreme Court
decided to approach the European Court of Justice and ask them to adopt a preliminary
ruling on the expedited procedure. The Supreme Court requested that the European Court
of Justice clarify whether the EU directives provisions regulating investors and deposit
holders insurance are properly incorporated into Lithuanian legislation. Under Lithuanian
laws, insurance for deposit certificate and bond holders is not applicable.
On 11 February 2014, the Bankruptcy Administrator received a notification from the
European Court of Justice giving the opportunity to the parties of the dispute, member
states and the European Parliament, Commission and European Central Bank to provide
written remarks within two months. The European Court of Justice did not agree to either
of two requests by the Lithuanian Supreme Court’s to consider the case in an expedited
manner.
Written responses have been provided by the Bankruptcy Administrator and other parties to
the European Court of Justice. It is understood that any ruling in the case may take some
time, given that the two requests to have the matter dealt with in an expedited manner
have been rejected.
The European Court of Justice has invited all parties to the request to an oral hearing in
Luxembourg on 20 November 2014, where the request will be examined by the Second
Panel, consisting of five judges. Appropriate representation has been arranged.
Until the European Court of Justice adopts a ruling on this matter, the Bankruptcy
Administrator is requesting that all deposit certificate and bond claims currently listed in
lower courts are suspended.
5.3.3 Approved claims
The table below reflects the number and value of admitted claims as at 30 September 2014,
less any amounts already distributed to first and second ranking creditors:
Priority ranking Number of approved claims Sum of approved amount (LTL million)
1 - -
2 1 2,119
3 3 13
4 17,145 2,583
7 21 205
Grand total 17,170 4,919
5.3.4 Ceded claims
Cession claims are claims made to the court by an original creditor (cedent) requesting that
his claim be transferred to another party. Once the cession is approved, the original
Report of the Bankruptcy Administrator to the Creditors of Akcinė Bendrovė Bankas Snoras (bankrupt) 18
creditor loses his right to claim and the new creditor takes his place in the list of approved
claims.
Ceded claims continue to be lodged and are dealt with by the Bankruptcy Administrator as
and when they are received. After examination of the ceded claims, the Bankruptcy
Administrator provides all the information and relevant documentation to the court.
At 30 September 2014 a total of 110 cession claims have been submitted to the court. Of
these, 107 have been completed and three claims have recently been submitted to the
Court for consideration.
5.4 Litigation
5.4.1 Switzerland
The potential claims in Switzerland continue to be progressed; however, at a speed
dictated by the local criminal process, which the Bankruptcy Administrator’s lawyers are
monitoring.
One significant claim has been drafted and was sent to the proposed defendant in July 2014
seeking a substantive response and/or a meeting to discuss settlement, prior to any
decision to file the claim being made.
As at 30 September 2014 no response had been received from the defendant. As such, the
Bankruptcy Administrator now intends to take further action to progress the claim in court.
Work on two further claims, against two additional proposed defendants continued in the
Period and claims are in the process of being drafted in this regard.
5.4.2 The civil claim against Messrs Antonov and Baranauskas
The civil claim against Messrs Antonov and Baranauskas was filed by Snoras in May 2012,
supported by a World-Wide Freezing Order obtained on 18 May 2012 against the assets of Mr
Antonov, for a value of at least LTL 1.7 billion.
Following various discussions between the parties and in anticipation of the extradition
hearing in the UK, the civil action against both Messrs Antonov and Baranauskas was stayed
on 15 December 2013. On 20 January 2014, the UK Court ruled in favour of the State of
Lithuania that the extradition of Messrs Antonov and Baranauskas should proceed. However,
an appeal was lodged shortly afterwards and a date of 22 July 2014 was set by court for this
hearing. This has again since been delayed.
The World-Wide Freezing Order remains in place, irrespective of the stay in the
proceedings, and the Bankruptcy Administrator’s team continue to monitor this as required.
5.4.3 Claim against Raimondas Baranauskas
Vilnius Regional Court upheld Snoras’ claim against Mr Baranauskas on 4 July 2013, and
ordered that Mr Baranauskas pay the amount of LTL 4.7 million to cover losses. Mr
Baranauskas appealed this decision, which was heard in the Court of Appeal on 24 April
2014.
Report of the Bankruptcy Administrator to the Creditors of Akcinė Bendrovė Bankas Snoras (bankrupt) 19
The Court of Appeal rejected Mr Baranauskas’ appeal, and upheld the Vilnius Regional
Court’s decision. No appeal was lodged or accepted by the Lithuanian Supreme Court and
therefore the judgment against Mr Baranauskas is valid and may be enforced.
The Bankruptcy Administrator is considering the available options in recovering the award.
5.4.4 Judgment against V. Antonov, O. Jampolskaja, A. Antonov and T. Antonova
The Vilnius Regional Court upheld Snoras’ claim against Mr V Antonov, Ms O Jampolskaja, Mr
A Antonov and Ms T Antonova in full and awarded Snoras LTL 20.2 million (including interest
and contractual penalties) jointly from all parties.
The decision was open to appeal but the time for this has now lapsed and the judgment is
final.
The Bankruptcy Administrator is considering the available options in recovering the award.
5.4.5 Ernst & Young claim
During the Period, the Bankruptcy Administrator continued his investigations regarding the
Bank’s claim for losses arising from their historical audit of the Bank. Further, and in
addition to those investigations, negotiations were finalised with Ernst & Young Baltic (EYB)
regarding potential settlement of the claim(s).
As at 30 September 2014, the Bankruptcy Administrator has put a recommendation to the
Committee for consideration to accept the settlement offer from EYB, which the
Committee approved on 2 October 2014.
5.5 Sale of subsidiaries
5.5.1 The Finasta Banking Group
The Bankruptcy Administrator had previously been negotiating a potential sale transaction
with the LHV Group (LHV), who had approval from the Bank of Lithuania to acquire the
Finasta Banking Group (Finasta) by 30 April 2014.
Due to a change in the proposed structure of LHV’s proposal, the deadline set by the Bank
of Lithuania passed without a sale being completed.
During the Period however, the Bankruptcy Administrator was approached by new parties
who expressed an interest in acquiring Finasta. As such, the sale process was reopened to
interested parties, three of which ultimately obtained Bank of Lithuania approval. After
receipt of best and final offers from these parties in September, a recommendation was
submitted by the Bankruptcy Administrator to the Committee, which approved the sale to
the best bidder on 23 October 2014.
Report of the Bankruptcy Administrator to the Creditors of Akcinė Bendrovė Bankas Snoras (bankrupt) 20
5.6 Bankruptcy Administrator procurement process
Mr Cooper confirmed his intention to retire from practice, meaning that a new Bankruptcy
Administrator had to be identified and appointed by the Committee.
Accordingly, a tender process was launched to assist the Committee in selecting a new
Bankruptcy Administrator.
As at the 30 September 2014 the Committee was deliberating over each of the candidates’
proposals, and reached a final decision on 16 October 2014.
Report of the Bankruptcy Administrator to the Creditors of Akcinė Bendrovė Bankas Snoras (bankrupt) 21
6 Next steps
The objectives of the bankruptcy in the next period are to:
• finalise the sale of Finasta;
• progress the sale of the loan portfolio (completion expected early in 2015);
• progress the sale of the Bank owned real estate and foreclosed assets;
• continue to work with legal advisors and the Bank’s staff to resolve disputed claims and
submit amendments to the Court for changes to creditor claims;
• review and reduce operational costs where possible; and
• continue to progress all litigation claims available to Snoras where the potential
recoverable values are proportionate to the recovery costs and likelihood of success.
The Bankruptcy Administrator will issue a further progress report for the period to
4 November 2014 as soon as it is practical after the end of the reporting period.
Akcinė Bendrovė Bankas Snoras (bankrupt) A. Vivulskio Str. 7 LT-03221
Vilnius www.snoras.com