August 23, 2019 / 1:59 PM / a month ago

Slovenia court ruling enables first bank bail-in repayment

* Appellate court upholds earlier verdict on Abanka

* Latest decision raises hopes for other bondholders

* Abanka already paid the 2 owners of scrapped bonds-source

By Marja Novak

LJUBLJANA, Aug 23 (Reuters) - A Slovenian appellate court has upheld a verdict by a lower court that a local bank had to repay two owners of subordinated bonds scrapped during Slovenia's 2013/14 bank overhaul, raising the possibility that more bondholders might be repaid.

The Celje Higher Court confirmed to Reuters on Friday that it upheld the verdict because "the bank did not fully inform" its clients about the possible consequences of purchasing subordinated bonds.

In 2013 and 2014 the government put more than 3 billion euros ($3.32 billion) into several, mostly state-owned banks, scrapping subordinated bonds issued by those banks in the value of some 600 million euros, as well as shares held by some 100,000 investors.

If other investors succeed in similar court cases, three major banks could end up paying millions in compensation to former holders of subordinated bonds, analysts say, pointing out only private persons may be able to use the argument of being poorly informed.

The three banks include Abanka and Nova KBM (NKBM), which are now both owned by U.S. investment fund Apollo Global Management, and the country's largest bank NLB .

A source familiar with the matter told Reuters Abanka repaid the two subordinated bondholders a total of some 1.5 million euros earlier this month while a Supreme Court official told Reuters on Friday that Abanka had asked for a review of the matter.

Abanka said it was obliged to protect its interests, declining to comment further on the matter.

Apollo and NLB had no immediate comment while the Bank of Slovenia said it would not comment on the ruling.

"We welcome the verdict which is logical as investors (in subordinated bonds) ... lacked information," Kristjan Verbic, the head of the PanSlovenian Shareholders' Association which represents a number of holders of scrapped bonds, told Reuters.

The Slovenian Constitutional Court ruled in 2016 that parliament must change part of a bank bail-in legislation to give greater legal protection to holders of scrapped bank bonds and shares. The finance ministry is preparing the changes and hopes they will be enforced by the end of this year.

However, the Bank of Slovenia and the European Central Bank have protested against the ministry's plan that would make the Slovenian central bank liable for any damages arising from court cases related to bail-ins.

The ministry said on Friday that the ruling does not question the bank overhaul, which was led by the Bank of Slovenia, but is based on a bank's breach of its duty to inform customers of the characteristics and risks of the bonds.

$1 = 0.9044 euros Reporting By Marja Novak; editing by Emelia Sithole-Matarise

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