Bulgarian court declares CCB bankrupt as of June 20 2014
Sofia Appellate Court ruled on July 3 to declare Corporate Commercial Bank (CCB) insolvent as of the day that it asked to be put under the special supervision of the Bulgarian National Bank (BNB), June 20 2014.
The court overturned the earlier decision by the Sofia City Court, which set the insolvency date as of November 6 2014, the day that the BNB repealed CCB’s banking licence. The central bank appealed that ruling, saying that the insolvency date should be set as of September 30 2014, the day when BNB-appointed administrators formally wrote down 4.2 billion leva worth of impaired assets, which pushed CCB’s equity into negative figures.
But the appeals court went further, saying in its motives that the bank should be declared insolvent at the earliest possible moment in time. It said that there appeared to be little difference between CCB’s balance sheets on June 30 2014 and September 30 2014 (prior to the write-down), meaning that the lender was de facto insolvent when it asked to be put under the central bank’s administration – but those circumstances were not ascertained until later.
If this ruling is allowed to stand and is not appealed at the Supreme Court of Cassation, then any deals with CCB assets can be voided by court decision. This would impact cession contracts signed by individuals and companies with large deposits at CCB (beyond the legally-guaranteed 100 000 euro level), who sold their deposit claims (usually to companies with outstanding loans from CCB – the depositors would get at least some of their money back, while the loan recipients would cancel part of their debt with the newly-acquired deposit claim).
Although there is no official data about the extent of this practice at CCB, some reports in local media in recent months have claimed that it was wide-spread enough to drastically reduce the lender’s assets, to a degree that it raised question marks about the bankruptcy receivers’ ability to raise enough money for the state deposit guarantee fund to pay back the 1.5 billion leva government loan it took to pay out all guaranteed deposit claims.
The bank’s receivers said on July 3 that they would push back the deadline for announcing the list of CCB’s creditors, taking advantage of recent legislative changes that extended the period of time granted to collect the claims, and was now expected to publish the list in late July.
(For full coverage of the CCB situation from The Sofia Globe, click here. Photo of CCB-branded ATM, with “out of service” sign: Clive Leviev-Sawyer)
