Bank Audi’s views on IFC’s proceedings before the English High Court
Beirut, August 19, 2024,
Bank Audi was recently informed that International Finance Corporation (IFC) and a fund affiliated with it filed proceedings before the English High Court seeking the full repayment of two-subordinated loan agreements that were signed in March 2014.
IFC’s legal action calls for the following observations:
- As stated in their title, the loan agreements are subordinated and, in Bank Audi’s views, continue to be subordinated following the maturity date of the subordinated loans in April 2024.
-
IFC is fully aware that, since October 2019, Lebanon has been experiencing an unprecedented financial and economic crisis, which the World Bank, IFC’s parent organisation, described as “one of the world’s top ten, possibly top three, most severe economic collapses since the 1850s”. Depositors at Lebanese banks, including Bank Audi, who are senior to the IFC’s subordinated loans, have been unable to recover their U.S. Dollar deposits in unrestricted funds.
-
On March 27, 2024, the Central Council of Banque du Liban, the highest authority of Lebanon’s Central Bank, issued a decision restricting the repayment of the IFC subordinated loans pending the passage of a bank restructuring law.
-
Historically, Bank Audi and IFC maintained an excellent business relationship, with IFC having extended multiple facilities to Bank Audi and its subsidiaries, the proceeds of which were deployed for the development of the Lebanese economy and the economies of other countries. With the exception of the subordinated loans, Bank Audi honored all its financial commitments to IFC.
-
IFC is a shareholder in both Bank Audi and Odea Bank, Bank Audi’s Turkish subsidiary. To date, IFC and its affiliated fund have received in excess of US$66 million in interest payments under the subordinated loans. Bank Audi only stopped paying interest on the subordinated loans in 2020 due to the lack of free profits, a condition for the payment of interest. IFC also received significant dividend payments on its shareholding in Bank Audi over the past years.
In spite of the above, IFC is now insisting on repayment in full (with interest) of the entire principal amount of the subordinated loans, disregarding their subordinated status, the hierarchy of claims, the Central Bank of Lebanon’s expressed restrictions and indeed, IFC’s mission and values, including the following “Integrity – We do what is right”.
Bank Audi shares the conviction that the World Bank and IFC have a significant role to play in Lebanon’s emergence from the severe crises it is currently facing. However, Bank Audi has no choice but to vigorously defend itself against IFC’s claim, in the interests of all its stakeholders including, above all its depositors.
