OREANDA-NEWS. December 06, 2011. Over the first nine months of 2011 joint stock company Parex banka proceeded with strenuous activities in three main areas, namely loan restructuring, debt recovery and property management. In the reporting period several major loan restructuring deals were successfully effected which required highly professional performance, including the ability to find acceptable conditions for all parties involved, reported the press-centre of Parex Banka.

“Professional performance of CIS of loan restructuring experts working with the CIS countries must be emphasized as instrumental for the bank’s capability to recover entire loans initially issued in the amount of several millions of Lats. Since its restructuring on 1 August 2010 Parex banka has in total recovered 197 million Lats, mainly by restructuring problematic loans and selling securities,” points out Christopher Gwilliam, Chairman of Parex banka’s Board.

The longsighted strategy Parex banka has continuously and consistently managed to prevent a forced sale of its assets.

In the reporting period business activity of Parex banka has been carried out in strict compliance with the restructuring plan and the budget; the bank has finished the first nine months of 2011 with losses amounting to 35 million Lats. Parex banka’s losses amounted to 120 million Lats in the same period of 2010.

These results were achieved mainly due to two material items, namely, the excess of interest payable over interest receivable and the provision for bad debts. Considering the fact that Parex banka has retained solely the impaired assets with permanent recovery problems. In many instances debt recovery proceedings were initiated and the repayment of principal amount and interest was continuously overdue. Hence it is legitimate that the interest income levels generated by the Parex bank loan portfolio is significantly lower than that of any other credit institution where it comprises both good and problematic loans.

In the reporting period Parex banka has commenced development and implementation of a large-scale complex project implicating sale of the bank’s subsidiaries, leasing companies in the CIS countries. The first results were achieved in the end of September 2011 when the bank made an exit from the Russian leasing market by entering into an advantageous agreement concerning sale of its Russian subsidiaries Parex Leasing and Extroleasing. Having received the first instalment Parex banka has already recovered more than 14.5 million US dollars and until the end of 2013 it will be continuously receiving amounts collected from gradual sale of problematic assets of the leasing company.

Thoroughly planned structure and terms of the transaction will provide for the cash inflow required for repayment of the state investment and contribute to achievement of the objectives outlined in the restructuring plan. In total considerable amounts have been recovered from Russian leasing companies from December 2008 to the present date, more than 120 million US dollars. The considerable recovered amounts were partly used to eliminate Parex banka's liquidity crisis in the past and partly to repay the syndicated loan of 164 million Lats guaranteed by the state, which in May 2011 was repaid by Parex banka in full and without any assistance from the state.

Property related matters, most notably sale, take-over and management of real estate have gained bigger significance and stake in the Parex banka's agenda. Considering that the real estate segment is still rather inactive and recovery is taking place at a very slow pace, the bank is not in hurry to sell the valuable assets contained in its portfolio. Since most items in the bank’s loan portfolio are expected to increase in value, the bank is efficiently managing the property taken over. As soon as the situation in the economy and real estate market improves it is planned to dispose off the property on possibly profitable terms in order to obtain cash resources required for repayment of the state investment. Along with positive developments in the market Parex banka will be increasingly engaged in selling real estate. At the end of the reporting period the real estate portfolio of Parex banka comprised more than 800 items including plots of land and industrial assets.