Lawyers for VTB Capital told the High Court at a hearing that although the company is solvent, it is unable to pay its employees or bills due to economic sanctions slapped on its Russian state-owned parent by Western governments.
The investment bank has $338 million on its balance sheet and $234 million in bonds, cash and other assets, but sanctions means its money is frozen, Daniel Bayfield QC of South Square Chambers said.
Judge Timothy Fancourt granted the bank's request to appoint financial adviser Teneo as administrator, though the decision won't take effect until the U.S. Office of Foreign Assets Control grants VTB Capital a license to wind down its business.
"There is no doubt that the company is insolvent and unable to pay its debts" under insolvency law, Judge Fancourt said.
U.K. regulators do not oppose the move, and Britain's sanctions agency, the Office of Financial Sanctions Implementation, has granted VTB Capital an exemption for administrators to pay out creditors, the judge said.
Bayfield said the company was "paralyzed" despite having money on hand because HSBC, its correspondent bank in the U.K., closed its account in March.
He argued that the administration process was less chaotic than liquidation and would allow creditors to be paid out more quickly. Bayfield acknowledged that the European Union is expected to introduce new, stricter sanctions, but he said the administrator's work should not be affected.
The Prudential Regulation Authority, which regulates banks, the Bank of England and the Financial Conduct Authority do not oppose the appointment, Bayfield added.
The bank is the third Russian lender to close in recent weeks. Directors of Sberbank CIB (UK) Ltd. applied for administration on April 1, blaming the "ability and risk appetite of critical suppliers to work with firms with links to the Russian state."
Neither subsidiary has been sanctioned. But its parent companies, Sberbank of Russia PJSC and JSC VTB Bank, have been hit with sanctions and banned from clearing sterling payments in the U.K. Teneo is also handling Sberbank's administration.
The British government has also encouraged investors to sell existing investments in Russia to turn off funding for President Vladimir Putin's regime.
VTB Capital is represented by Daniel Bayfield QC and Adam Al-Attar of South Square Chambers, instructed by Weil Gotshal & Manges (London) LLP.
The case is in the Matter of VTB Capital PLC, case number CR-2022-000983, in the High Court of Justice of England and Wales.
--Editing by Joe Millis.
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