Russian Banks Count Pigs, Lingerie as Collateral

[Joanne98]

Source: Bloomberg

Oct. 26 (Bloomberg) -- When Russian billionaire Alexander Lebedev’sOAO National Reserve Bank seized collateral offered against a loan from a cash-strapped borrower, a health quarantine was slapped on the security: 40,450 pigs.

“We had a court decision to take away the collateral, which is the pigs,” Lebedev, 49, said in an interview in Moscow. The borrower, a farm near Samara on the Volga river, agreed “with the local authorities to establish a quarantine” against African swine fever. The former KGB officer is still waiting to collect the pigs offered against a loan of 100 million rubles ($3.5 million). A kilogram of live pig costs an average of 78.4 rubles, the National Meat Association says.

Russian lenders are seeking to recoup losses by accepting a range of collateral, including stakes in Wild Orchid, a lingerie retailer, and food store Mosmart. The banks have been hit by a surge in non-performing loans, which Moody’s Investors Service estimates may rise to 20 percent of the total by year-end. The bad debt threatens to stall bank lending and may jeopardize a recovery in Russia’s economy, which grew 0.6 percent in the third quarter from the second, the Economy Ministry says.

“It is not a viable strategy for a bank because banks aren’t doing their core business there,” Eugene Tarzimanov, assistant vice president and banking analyst at Moody’s in Moscow, said. “They could be stuck with those assets for a number of years.”

Strange Assets

Russian banks are characterized by “very high risk on a global comparison,” Standard & Poor’s said in a Sept. 28 report. The share of “problem loans” may jump to $110 billion by year- end and account for 25 percent of total lending by the end of 2010, compared with 11 percent in the middle of this year, Moody’s estimates.

“We have no idea how to build roads, milk cows or pour metal,” said Vladimir Tatarchuk, co-head of corporate finance at Alfa Bank, told reporters in Moscow on Oct. 23. “We’re finance professionals, that’s what we do. We have no plans to develop other businesses. If we have an opportunity to sell immediately” assets taken as collateral, “we’ll do it, even if we lose some potential upside just so we can recover our money.”


Read more: http://www.bloomberg.com/apps/news?pid=20601109&sid=aTYX6OihzZhw

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I hope Wall Street isn't reading this article. They'll think it's a good idea!

[skoalyman]

1. Give them time, they'll be taking one of every organ, you can live without .

:scared:

[happyslug]

2. American banks can do, and do do, these types of liens all the time

Technically their are mortgages against personal property, perfectly legal in every state of the union. Most people are familiar with car loans where the bank retains the title of the car, that is a variation of this came concept. Till about ten years ago, Sears would show up in my Chapter Seven Bankruptcy cases to exercise their claim on the item purchased from Sears. In such sales Sears always obtained a lien on the property being sold. That lien is NOT discharged in Bankruptcy. THus the debtor has a choice, agree to pay Sears what the value of the item is (Or the amount owned on the item, which ever is less) OR give it back to Sears. Sears rarely wanted the item back so their offer of settlement were always reasonable and my client preferred to keep the item (Generally Washers, Dryers, Stoves, Refrigerators and other "white" goods) then to give them back to Sears.

Now in the last ten years even Sears stopped doing such liens on property and going with straight Credit Card debt WITHOUT any claim on any one piece of property. In Bankruptcy such debts are 100% dis-chargeable, so Sears stop appearing in most of my Bankruptcy cases about ten years ago. I point this out for such personal property liens are perfectly possible in every state of the Union. I expect them to come back as this credit crisis gets worse, but such purchase property liens AND even liens on existing personal property is perfectly legal in the US and always have been.