VEDOMOSTI. Russian Railways-controlled pension fund Blagosostoyanie invested money in defaulted mortgage loans of KIT Finance. This became known from the bank’s FY11 IFRS financial statement, Vedomosti business daily wrote.
As the newspaper noted, last summer KIT Finance sold a Rub 38 bln portfolio of mortgage loans to VTB 24 at a 1.8% premium to the par value. However, KIT Finance holds a portfolio of bad loans, i.e. risky credits that turned into NPLs in 2009. Some of the remaining mortgage portfolio was assigned at a discount to the balance sheet of KIT Finance Capital, and as collateral for these loans at the end of 2010 KIT Finance Capital issued bonds, all of which were bought by private pension fund Blagosostoyanie, said the bank’s annual financial statement.
Private pension fund Blagosostoyanie is a controlling shareholder of KIT Finance, and the bank’s board chairman Yury Novozhilov took office as the fund’s CEO in February 2012. Bonds issued total Rub 3 bln, they will mature in June 2014, the yield rate equals 11%, KIT Finance deputy general director Konstantin Yakovlev specified. He emphasized that the amount of collateral for the bonds “covers risks in full”.
The collateral is “around 4,000 defaulted loans for a total of Rub 5 bln, the repayment of which is sought in courts," one of the bank’s executives said. This portfolio was assigned to KIT Finance Capital at a discount of 35%, “i.e. the coverage for these bonds was formed in a higher amount than required”, he noted. The bank’s losses from the sale of the portfolio at such a discount were already reserved, but the deal improved the bank’s balance sheet. Meanwhile, KIT Finance Capital continues to operate this portfolio (demands in courts residential facilities collateralized and sells them). Already Rub 500 mln was received, and during the remaining 18 months prior to the redemption of the bonds another Rub 2.5 bln is expected to be recovered, as courts already issued awards for most of the defaulted obligations.
KIT Finance will put those mortgage loans, which remain unrecoverable by 2014, back on its balance sheet and this is provided for in a special agreement, Vedomosti’s respondent said.
