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Finko AM (Varks), a part of Finko Group, has proposed a commitment to follow a repayment timeline to cover the amount due to investors on Mintos by the end of 2022.
Unlike a possibility of a lending company in the liquidation process when the liquidator might appoint a third party to service the company’s portfolio, the team of Varks are still servicing the issued loans as per the law in Armenia. Due to situation improvement in Armenia (see the comment of CEO of Finko and re-adjusted debt collection efforts, Varks has re-developed a plan to recover borrowers’ repayments. In light of this, Varks has also made a proposal to cover amounts due to investors on Mintos.
The proposal consists of immediate payment of € 2.4 million by 17 June 2020 and a payment by 30 June 2020 for pending payments interest that had accumulated towards investors on Mintos up to 19 April 2020.
Because of recommendations from the Central Bank of Armenia as of mid-April 2020, Varks starting from mid-April did not calculate and collect interest, penalties, and other possible commissions from borrowers except principal. Hence, starting from 19 April 2020 penalties and interest for investors are not accrued anymore.
We have assessed that Varks continuing to service the portfolio would lead to better recovery rates of the portfolio, opposite to the liquidation committee possibly appointing a third party to service the existing portfolio. We also believe that this proposal is in the interests of investors on Mintos, as it will lead to sooner recoveries of their invested funds.
The cooperation with Finko Group and Varks continues on the base of the proposed repayments timeline, the final details of the proposal are being worked out.
Finko Group guarantee
As of the beginning of June, Finko group has settled all its other pending payments except Varks. After a thorough review of Finko Group’s financial standing, the group guarantee is not being exercised, as the group would not be able to cover Varks outstanding portfolio on Mintos in a single payment. Possible legal actions to enforce Finko Group guarantee at this moment would jeopardize the overall expected recovery amount both for Varks and other Group’s companies.
Overview of the Varks licence revocation and the situation in Armenia
On 24 March 2020, the Board of the Central Bank of the Republic of Armenia (CBA) published a revocation of license for the lending company Varks. Varks, as a part of the Finko group, is represented as Finko AM on Mintos. The reason for the revocation, according to the announcement by the CBA, is a violation of the minimum capital requirements. Finko AM (Varks) is now in the process of liquidation under article 2, chapter 9 of the Law of the Republic of Armenia on Credit Organisations. Since the revocation of licence, Mintos had hired a local legal council to represent the interests of investors and Mintos in the liquidation process.
At this time, Mintos has submitted the creditors claims on behalf of investors on Mintos according to the liquidation process. The repayment timeline laid out above is part of the liquidation plan.
Meanwhile, the transfer of borrower repayments to investors on Mintos was highly impacted by the ongoing COVID-19 pandemic and the heavy lockdown restrictions in the country, making it difficult for borrowers to make their repayments, as well as for Varks to perform debt collection. Following the recent easing of lockdown restrictions in Armenia in May, Varks has resumed debt collection processes and expects the situation to come back to normal in the coming months. See an in-depth review of the current situation in the comment by Janis Pizics, the CEO of Finko Group.
About Finko AM (Varks)
Established in 2016, Finko AM issues short term loans in Armenia. Current outstanding investments of Mintos investors in Finko AM loans are € 19 785,062. There are 48 163 investors with active investments in Finko AM loans, with the average investment per investor being € 411. The current amount of pending payments on behalf of Finko AM is € 4 782,106.
We will continue to share updates on Finko AM (Varks). We thank our investors for patience as we work to represent your interests.