Dmytro Firtash, a Ukrainian business tycoon with ties to President Viktor Yanukovych, has acquired the troubled Nadra Bank, expanding a business empire that was under attack when Yulia Tymoshenko was prime minister.
The $440 million acquisition of 90 percent of Nadra, which has been under National Bank of Ukraine administration since 2009, gives Firtash a foothold in the country’s financial sector to add to his considerable domestic and foreign interests in chemicals, natural gas and media.
The purchase comes after Firtash was last month summoned by a U.S. court to answer a lawsuit filed by Tymoshenko, a bitter foe of the controversial businessman and the president, ousted shortly after Yanukovych defeated her in the presidential election. She alleges that Firtash colluded with the government to defraud Ukraine of some $3 billion worth of natural gas.
Both he and the government deny any wrongdoing.
Firtash acquired the controlling stake in Nadra through his Austria-registered Centragas Holding which bought an entire additional stock issue by the bank making up 89.97 percent of its shares for 3.5 billion hryvnias ($440 million), Nadra said in a statement.
With assets of Hr 22.9 billion, Nadra is Ukraine’s 11th largest bank. It has restructured its foreign debt with significant write-offs after going into default in 2009, Reuters reported.
Ukraine’s central bank has pumped in more than $1 billion in loans and other assistance since 2008 to keep the bank afloat – and another $600 million may be needed to make it a viable institution, according to government and International Monetary Fund estimates.
Although questions of transparency remain an issue, Dragon Capital investment bank analysts wrote favorably about the acquisition: “We consider this news positively, as the first step towards recapitalization has now been completed. However, we are still waiting for the government to announce the remaining recapitalization needs and the financing sources.”
Angry depositors have long battled to get their cash returned, which required intervention from the government amid investigations into alleged financial mismanagement at the bank. The bank’s former chief executive officer, Ihor Gilenko, and other ex-bank officials remain fugitives from justice after prosecutors charged them with embezzlement.
Last year, the bank owed depositors an estimated $1 billion to depositors, including individuals and commercial entities, according to Ihor Stepanov, coordinator for the United Independent Committee of Depositor.
There have been no public statements about the bank’s plans to repay depositors.
The purchase by Firtash was given the go-ahead by the central bank, which had been looking for an investor.
Cleaning up Nadra has been one of several key conditions set by the IMF in exchange for a credit line of up to $15 billion. The IMF has called upon Ukraine to either shut down the bank, in turn selling off its assets, or to find a new investor that could recapitalize it.
Despite bringing in Firtash to save Nadra, questions linger over what went wrong at the bank and why Firtash – long considered an investor in it – would be interested in buying it.
Alexander Valchyshen, head of research at Investment Capital Ukraine, told the Financial Times that Firtash would use the bank to service his business empire’s cash flow. He added that he could use his media outlets to improve the bank’s damaged reputation and use cash from depositors to finance his other businesses.
Firtash achieved prominence as a co-owner along with Russia’s gas giant Gazprom of RosUkrEnergo, a Swiss-registered gas trader that was ousted from the multibillion-dollar gas trade between Russia and Ukraine in 2009 by Tymoshenko.
Since Yanukovych came to power, Tymoshenko has come under criminal investigation by prosecutors for alleged financial wrongdoings while she was prime minister from 2007 to 2010. One probe is looking into her role in concluding the deal with Russia in 2009, removing RosUkrEnergo and securing a new gas contract between the two countries, which the government has complained sets the price of gas too high. She denies wrongdoing.
The accusations and counter-attacks relate to the 2009 deal with Russia, which allowed Ukraine’s state gas company Naftogaz to seize 11 billion cubic meters of gas from RosUkrEnergo. An international court ruled the move illegal last year, forcing Naftogaz to return around $3 billion of gas to RosUkrEnergo.
Tymoshenko claimed that Firtash and the government colluded to ensure RosUkrEnergo won the case, at the expense of state-owned Naftogaz. Firtash, who has close ties to Yanukovych’s inner circle, has also acquired three major chemicals plants since the president took power.