Companies directly or indirectly linked to Tsvetan Vassilev, majority shareholder in the Corporate Commercial Bank (CCB), received an estimated 2.5 billion leva, or about 1.3 billion euro, in loans from the bank, according to a report by consultants AlixPartners Services UK LLP, the company hired by Bulgaria’s state deposit guarantee fund to track and recover money from the now-insolvent lender.
The report was made public by the CCB bankruptcy receivers, as mandated by amendments to the bank insolvency law, approved by Bulgaria’s Parliament last month, which require receivers to make public reports of the inquests into what caused the insolvency.
The version published, in Bulgarian as stipulated by law, is not one that AlixPartners endorses – in February, the firm specifically pointed out that while it stands by its English-language report, it would not authorise a Bulgarian-language version because “any internal bank translation is not likely to be of sufficient quality and accuracy necessary for third party readership”. (At that time, the firm agreed to make the original report available to MPs only, emphasising that it continued to “strongly disagree with the release of the report”.)
The published report said that the funding received by Vassilev’s firms had very limited potential to be recovered because the loans were issued to companies that had very little in the way of loan guarantees, if any, nor did they hold significant assets.
Some of the money was used to give loans to other companies that were not CCB’s customers, a practice meant to obscure the final recipient of the funding. Although CCB’s receivers could attempt to recover the money in court, the odds that it would able to follow the trail to reach the money or a tangible asset was low. Additionally, the absence of a judicial practice in applying the bank insolvency law further complicated the prospects of recovery.
At the time the report was drafted, September 2015, AlixPartners estimated it could recover up to 800 million leva of CCB’s funds, but also pointed out that such an estimate was speculative, because it was contingent on a number of factors.
CCB receivers, appointed by the state deposit guarantee fund, were tasked with recouping the insolvent bank’s assets, which are needed to repay the government bailout of the deposit fund – in 2014, the cabinet lent the guarantee fund more than two billion leva, money that the fund needed to fully pay out CCB depositor claims.
The bulk of the report, which runs to 574 pages (in the translated version), details the money flows to companies linked to Vassilev. Among those companies were telecom operator Vivacom, fuel retailer Petrol, Rousse shipyards, a Serbian glass factory and Rodina Properties.
CCB was Bulgaria’s fourth-largest lender by assets when it asked to be put under the special supervision of the central bank in June 2014, following a run on deposits. It lost its banking licence in November 2014 after an audit found it held mainly impaired assets, as a significant part of its loan portfolio was not backed by sufficient collateral, and had to write-down 4.2 billion leva in assets.
(For full coverage of the CCB situation from The Sofia Globe, click here. The translation of AlixPartners’ report, in Bulgarian, can be found here. Logo and corporate motto of Corporate Commercial Bank – “our clients are dear to us” – from a CCB advert. Screengrab from corpbank.bg)