“A gesture of goodwill": ARMA may include loan servicing in the terms of the tender for the management of the Gulliver shopping center, but will it do so

The Asset Recovery and Management Agency may prescribe the condition of servicing loans in state-owned banks, including Oschadbank, in the tender documentation for the tender for the selection of a manager for the Gulliver shopping center in Kyiv, but it is unknown whether it will do so. This was stated in an exclusive commentary for UNN by lawyer, Honored Lawyer of Ukraine Volodymyr Bohatyr.

All key terms and conditions related to the management are specified in the property management agreement. In other words, the issues that concern the state-owned Oschadbank regarding the potential failure of the manager to fulfill its obligations can be specified (or not, since there are no strict conditions on the content) in this agreement. That is, it is purely a matter of agreement, goodwill, which in this case should be based on public interests

The lawyer explained that the procedure for managing seized assets is based on the principle of efficiency, namely, at a minimum, preserving the assets and, at most, increasing their economic value. That is, the law requires the manager to effectively carry out business activities with the property entrusted to him, and this should include ensuring the fulfillment of current contractual obligations.

“After all, if a business fails to fulfill them, it can be declared insolvent, i.e. bankrupt. Of course, this cannot be regarded as a criterion of efficiency,” Bogatyr said.

According to him, ARMA is fully responsible for the consequences of the decision, including the content of the management agreement and the effectiveness of its implementation.

Volodymyr Bohatyr called on ARMA to act responsibly, because without clear requirements for the manager there is a high risk of financial losses for both the state and the asset itself.

“The practice of ARMA fulfilling its duties shows that the approach of the state body is far from effective,” he added.

Context

On October 30, ARMA announced a competition to select a manager for the Gulliver shopping center. The head of the agency, Olena Duma, proudly stated that she had taken the strictest possible approach to the selection of a manager for this high-profile asset and even set the maximum possible 4 criteria for candidates. Among the conditions to be fulfilled by the bidders are property worth at least UAH 100 million, a professional team, proven experience in managing similar facilities, and proven financial solvency.

The building of the Gulliver shopping center is pledged as collateral for a mortgage loan with state-owned banks, including Oschadbank. However, among the criteria set out by the ARMA, there is no mention of the need to repay the loan.

Oshchadbank has repeatedly stated that the decision to transfer Gulliver to ARMA harms the interests of the state-owned bank, as it will deprive it of loan payments from the company that owns the capital's complex . Oschadbank's losses due to the termination of loan payments could reach more than UAH 20 billion.

After the announcement of the tender, Arsen Miliutin, deputy chairman of the board of Oschadbank in charge of NPLs, said in a commentary to UNN that the state-owned bank plans to recover the building of the capital's Gulliver shopping center in its favor if ARMA transfers it to management. He expressed indignation that instead of paying the loan to state banks, Gulliver's earnings would be given to an “incomprehensible manager”.

Only after that, and under public pressure, did ARMA representatives decide to meet with Arsen Miliutin, the deputy chairman of Oschadbank's board responsible for NPLs, to discuss the management of the seized asset, which affects the interests of the state-owned bank in terms of loan repayment. However, the meeting failed to reach a consensus and the parties agreed to “continue cooperation”.