Negative outlook for Bank Nadra Ukraine, upgrade for Bank Finance and Credit

Moody's Investors Service has confirmed the Caa2 long-term local and foreign currency deposit ratings and B3.ua National Scale Rating (NSR) of Bank Nadra of Ukraine, concluding the review for possible downgrade initiated in January 2009.
The outlook on the bank's deposit ratings is now negative and the outlook on the BFSR and debt rating is stable.
Bank Nadra has been under the temporary administration of the National Bank of Ukraine with a payment moratorium since Q1 2009 following the bank's substantial liquidity and asset quality problems.
Moody's understands that the NBU has agreed that the current shareholder of Bank Nadra will recapitalise the bank in the amount of UAH 6 bln in several tranches during 2010-2011. If these plans fail, the bank will likely be liquidated and its deposits transferred to other banks. Conversely, if the bank is adequately recapitalised, this may have positive rating implications.
Meanwhile, Moody's upgraded the ratings of Bank Finance and Credit (F&C). All of the bank's ratings now carry a stable outlook, except for the NSR which carries no specific outlook.
This rating action concludes a review with direction uncertain that Moody's initiated in March 2009, prompted by F&C's default on repayment of US$ 70 mln of syndicated debt which triggered a downgrade of the bank ratings after which the ratings were left under review with direction uncertain.
In terms of liquidity, Moody's notes that immediate liquidity pressure from deposit outflows have eased and the bank's deposit dynamics is now positive as customer funds increased by 8% in H2 2009. Furthermore, F&C reached an agreement with Eurobond creditors to extend the maturity of US$ 100 mln of Eurobonds until January 2014, and also secured extension of the NBU refinancing facility of UAH 6.4 bln (US$ 808 mln) until July 2015. These developments render the bank's liquidity position more comfortable in the medium term.
At the same time, Moody's notes that F&C has not yet reached an agreement with its creditors on the restructuring terms of the US$ 70 mln syndicated loan on which it defaulted in March 2009, which continues to expose the bank to liquidity and legal risks.