[WATCH] BOV intent on settlement on €363 million Deiulemar claim

Bank of Valletta is intent on settling out of court a claim for €363 million made against the bank by Italian bondholders of the defunct Deiulemar shipping company, even though its initial offer of €50 million has been rejected.

BOV CEO Rick Hunkin told MaltaToday that the bank did not want to drag the case through the various levels of court litigation, as it wanted to be clear of this “shadow that has been hanging over the bank for a number of years”.

The controllers of the Torre d’Annunziata shipping company, whose fraudulent bankruptcy left thousands of investors with nothing, have already rejected a €50 million out-of-court settlement put forward by BOV earlier this year.

In 2018, BOV appealed an Italian court’s order for a precautionary warrant that requested it to hive off €363 million, as a provision for damages requested by liquidators of the Deiulemar group and representatives of the company’s 13,000 Italian bondholders.

The court has yet to issue a sentence and the case can be expected to go on into appeal and to the final Cassation Court decision.

But the bank remains intent on settling the case out of court, even though it insists it had no blame and played no part in the decision-making that led the investors to lose their money.

As expected, Hunkin would not say how high BOV was willing to go to settle the case out of court.

But he admitted that the bank had put aside €100 million to settle three litigation cases it had pending when Hunkin took over the CEO role last year.

The other two litigation cases – one involving the La Vallette Multi Manager Property Fund and the other involving the Swedish Pension Agency – have since been settled out of court for €4.6 million and €26.5 million respectively.

Effectively, that leaves BOV around €70 million to settle the Deiulemar out of court, although there is nothing holding the bank from going even higher than that in order to ensure closure.

Additionally, more funds will be released and available after the bank reached an agreement with insurers to pay a part – as yet unspecified – of the SPA settlement.

Bank of Valletta is facing such a lofty claim for damages because, in 2009, it had taken over a trust that held €363 million in assets of the Deiulemar company, which filed for bankruptcy in 2012. A Rome criminal court in 2004 had already determined that the Deiulemar company had under-declared liabilities of €700 million. In 2014, seven members of the three founding families of the Deiulemar company were jailed for up to 17 years for illegal financial transactions, owing €800 million to creditors.

Correspondence banking

BOV CEO Rick Hunkin

Hunkin said BOV was also pursuing intensive dialogue with banks in the United States after Raiffeisen Bank announced it would no longer offer BOV corresponding services after March 2021.

This would leave BOV customers with no sure and swift way of affecting payments in US dollars.

“Having a corresponding bank in the US is key for our customers trading in US dollars,” Hunkin said. “And we are currently in negotiations with Raiffeisen and other institutions to try and secure corresponding services beyond March 2021.

He said potential banks were nervous in dealing with Malta with the Moneyval being a major issue.

“Having Malta fail in nine out of 11 of Moneyal’s focus area, is of major concern to potential correspondence banks,” Hunkin said.

“And with some foreign banks already nervous with Malta’s focus on gaming, marijuana and bitcoin, Moneyval adds a further complication that the BOV needs to overcome if we are to secure a US corresponding bank.”

He said that the bank was, in the meantime, preparing for a worst-case scenario and was meeting those customers that needed US dollar corresponding services and discussing a possible scenario where such services were no longer available.

“One solution would be for customers to start issuing payments in Euros, and we are currently encouraging affected customers to investigate how feasible such a switch would be for them.”