Vlad in Debt for Equity Swap (kind of)

[greenginger]

Unfortunately for the Jambos it is'nt a deal to put a better face on their accounts.
He is having to give the Ukio Bankas the option to convert his 50 million LTL loan to equity to satisfy the Lith central bank.

Things must be getting desperate at Kaunus Central.

[Kaiser_Sauzee]

What does it all mean??

[H18sry]

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Unfortunately for the Jambos it is'nt a deal to put a better face on their accounts.
He is having to give the Ukio Bankas the option to convert his 50 million LTL loan to equity to satisfy the Lith central bank.

Things must be getting desperate at Kaunus Central.

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What does it all mean??

He's up ***** creek without a paddle

[cockneymike]

Is this another debt for equity swap, if so, do you have a link?

[PaulSmith]

http://www.euroinvestor.co.uk/news/s...px?id=10930547

On 10 March 2010 the Board of the Bank of Lithuania permitted AB Ūkio bankas to include into Tier 2 capital a seven year LTL 50 million subordinated loan provided to the bank by Vladimir Romanov, considering the amended conditions.
Conditions of subordinated loan were supplemented by individual agreement
permitting subordinated loan be converted to ordinary shares.


I think that it means that Vlad lent his bank £13.2m?

[mim]

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I think that it means that Vlad lent his bank £13.2m?

.....and that £13.2 million has now been converted into more shares in his own bank. (I think).

How many valueless shares can you buy for £13.2 million?

[Woody1985]

It sounds like they're satisfying the paper money worries by hoping things come good again in future and that he will get it all back.

[Part/Time Supporter]

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On 10 March 2010 the Board of the Bank of Lithuania permitted AB Ūkio bankas to include into Tier 2 capital a seven year LTL 50 million subordinated loan provided to the bank by Vladimir Romanov, considering the amended conditions.

Conditions of subordinated loan were supplemented by individual agreement permitting subordinated loan be converted to ordinary shares.

I think that it means that Vlad lent his bank £13.2m?

Sounds like he had already loaned the money to UB, but they have now been allowed to reclassify it as they have changed the conditions of the debt, now allowing it to be convertible to shares. He will have done this to reduce the pressure on UB after they announced poor financial results a week or two back. Changing the classification means that it will improve the capital ratios of UB, which the markets use to assess the quality of their debt.

It doesn't help his financial position but he has evidently had to do this to ease UB's situation. If Romanov had not done this, then it would have been more likely that other lenders to UB would have taken fright. It's a symptom of things having gone pear shaped over the last 12-18 months.

[jgl07]

But he is only loaning money to himself!

I can't wait for Hearts accounts to come out. I suspect we will still be waiting come the summer as I cannot see any auditors signing off the accounts given the state of UBIGs finances.

I noticed that Portsmouth have been banned from the Europa League next year even if they win the FA Cup as they are not in a position to file accounts.

If Hearts do sneak into the top-five and teams above them reach the SFA Cup Final, it will appear that they might be banned from Europe.

[Sergey]

There was also a large share transaction yesterday of around 2.5 million Ukio shares (which equates to about 1% of their stock) being sold. I know nothing yet as to the buyer and/or seller.

Probably unconnected, but the timing is uncanny.

[HFC 0-7]

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But he is only loaning money to himself!

I can't wait for Hearts accounts to come out. I suspect we will still be waiting come the summer as I cannot see any auditors signing off the accounts given the state of UBIGs finances.

I noticed that Portsmouth have been banned from the Europa League next year even if they win the FA Cup as they are not in a position to file accounts.

If Hearts do sneak into the top-five and teams above them reach the SFA Cup Final, it will appear that they might be banned from Europe.

I was thinking this as well, think it would be great if they did get into 5th and have the opportunity to get into Europe only for UEFA to say no because you never submitted your accounts.

[Kato]

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Changing the classification means that it will improve the capital ratios of UB, which the markets use to assess the quality of their debt.

So instead of the shares being worth nowt he's improved the situation to them being worth b*gg*er all.

[Part/Time Supporter]

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So instead of the shares being worth nowt he's improved the situation to them being worth b*gg*er all.

Kind of.



It's more to do with other banks (including British ones, I suppose) lending to UB. If they have **** capital ratios then the other banks would be less likely to lend to them and even if they did, it would be on worse terms for UB.

This was first hinted at by the Lith central bank back in December, along with other "issues" that UB would have to sort out by June. The change of this loan's status gives them LTL 571M in capital, while they lost LTL 75M on trading last year. This is comparable to the British banks, but obviously on a much smaller scale. Plus you have to wonder whether the Lith government could / would stand behind UB in the way that the Treasury has propped up RBS / HBOS / Northern Rock. One of Labour's arguments against the SNP has been that an independent Scotland wouldn't have been able to prop up RBS and / or HBOS because of their scale relative to the state.

....

http://en.wikipedia.org/wiki/Tier_2_capital

UB is now able to include this Romanov loan as Tier 2 capital because it is now a "hybrid instrument" after the loan conditions were changed. Before it was just a plain loan, which isn't included in capital at all. Note that if Romanov had straight swapped the loan for shares in UB (as he did before with Hearts), the funds would now be classed as Tier 1 capital. These terms were used a lot in the discussions re the British banks, ie most of them let their ratios of tier 1 / tier 2 capital to assets get far too low, which meant that they were overstretched and in danger of insolvency if enough borrowers defaulted.

[007 Mickey Weir]

Sorry but this confuses the hell out of me. Really can't see how you can clear your own debt by lending yourself money?? Does it just take the amount away from the value of the business?

[Hainan Hibs]

I wish my University offered degree's in Yamonomics. Economics is so last century

[thekaratekid]

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Is it not the case that Portsmouth have not applied for a euro licence? which would exclude them from european competition even if they qualified through league or cup competition success

To obtain the UEFA license required to play in Europe you have to have filed your accounts. Portsmouth didn't.

[grunt]

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Kind of.

Nice clear explanation, thanks.

[whiskyhibby]

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.....and that £13.2 million has now been converted into more shares in his own bank. (I think).

How many valueless shares can you buy for £13.2 million?

It now means he owns even more of a Bank, The Yammish will be in rapture!!

[Arch Stanton]

Isn't it the case that, if UB goes bust then his shares will be worthless, however, when this investment was a loan there would have been a good chance of getting some of it back.

[KB1]

Thats is correct, loan debtors are repaid first before any shareholders of ordinary shares

[CyberSauzee]

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Sorry but this confuses the hell out of me. Really can't see how you can clear your own debt by lending yourself money?? Does it just take the amount away from the value of the business?

Ukio Bankas is a plc. Vlad just happens to be the major shareholder, who together with his mother and UBIG own the controlling interest in Ukio of just over 50%. So in effect he controls the bank, but he doesn't own it outright. He 'loaned' Ukio cash last year to keep it going, and this news today is just tidying up this transaction.

[Pedantic_Hibee]

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It now means he owns even more of a Bank, The Yammish will be in rapture!!

Contrastingly, there's not a peep on JKB about this at all. It's an absolute non-story, nothing to worry about and it's another statement of intent that they are now a big club.

In other words, they're too busy hurting in terrific fashion about the wee team completing their stadium. Hurting, really, really badly.

[Hibby Kay-Yay]

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Contrastingly, there's not a peep on JKB about this at all. It's an absolute non-story, nothing to worry about and it's another statement of intent that they are now a big club.

In other words, they're too busy hurting in terrific fashion about the wee team completing their stadium. Hurting, really, really badly.

Why would they need a thread on JKB? There are always plenty on here for them to read.

[IWasThere2016]

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Sorry but this confuses the hell out of me. Really can't see how you can clear your own debt by lending yourself money?? Does it just take the amount away from the value of the business?

Internal shuffling of the cards.

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Ukio Bankas is a plc. Vlad just happens to be the major shareholder, who together with his mother and UBIG own the controlling interest in Ukio of just over 50%. So in effect he controls the bank, but he doesn't own it outright. He 'loaned' Ukio cash last year to keep it going, and this news today is just tidying up this transaction.

Perfectly put.

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I wish my University offered degree's in Yamonomics. Economics is so last century

[StevieC]

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Isn't it the case that, if UB goes bust then his shares will be worthless, however, when this investment was a loan there would have been a good chance of getting some of it back.

It doesn't look like this was an opportunity for Vlad to scrape anything back but more of a requirement to keep the bank afloat and appease the higher powers.

[HFC 0-7]

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To obtain the UEFA license required to play in Europe you have to have filed your accounts. Portsmouth didn't.

Which, I assume, will be the same for Hearts, they cant have obtained a UEFA license if they havent filed their accounts.

[Peevemor]

The fact remains that while this latest manoeuvre at UKIO is an administrative exercise (as was the debt for equity swap at HoMoFC), the need arose because there were was a hole in the finances, a large part of which is money that is no longer in the hands of Vlad's empire.

How long can he afford to plug the gaps in the manner? How much reserve does he have left to fall back on?

[greenginger]

Whist Vlad's money was in the form of a loan there was a chance it would be repaid if the Bank's finances improved.Now the money has been converted to shares he has to find some other mug, sorry, investor to buy them and that will dilute his % share holding and may'be lose overall control of the Bank. In other words £13 million down the pan!

Its a bit like buying a whole team and a couple of subs of Mirsad Beslijas.

Keep up the good work Vlad.

[cockneymike]

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Whist Vlad's money was in the form of a loan there was a chance it would be repaid if the Bank's finances improved.Now the money has been converted to shares he has to find some other mug, sorry, investor to buy them and that will dilute his % share holding and may'be lose overall control of the Bank. In other words £13 million down the pan!

Its a bit like buying a whole team and a couple of subs of Mirsad Beslijas.

Keep up the good work Vlad.

I'm not sure that's right Greenginger. Is it not the case that the bank dilutes everyone's shareholding by issuing this new stock, but that new stock goes to vlad as a repayment of the loan already given by him to ukio. As a result his shareholding goes up therefore his ownership of ukio is strengthened, not weakened.

[cockneymike]

Can someone clarify for me. From what I understand Vlad controls Ukio Bankas (owns half the stock himself or through his family) the rest is owned by whom?

Also Hearts are owned by a company that is mainly owned by ukio and part owned by vlad?

Also where do UBIG fit into it, and who owns them?