Russian Railways will loan KIT 22 billion rubles ($713 million) for the bank's day-to-day administration, while the Deposit Insurance Agency will provide a loan of 47 billion rubles to refinance KIT's mortgage portfolio. TransFinCapital will provide 4 billion rubles in reserves to recapitalize the bank.
Russian Railways will take a 45 percent stake, while TransFinCapital, part of Russian Railway's pension fund, will take 45 percent in addition to the 10 percent stake it already owns.
The deal marks a second attempt at restructuring KIT after the failure of a deal in October in which Russian Railways and state diamond monopoly Alrosa tried to purchase the bank for a nominal $100.
In September, the same month KIT collapsed, legislation went into effect that handed responsibility for administering and winding up failed banks to the Deposit Insurance Agency from the Central Bank.
But in order to receive the necessary financing from the agency, the bank had to change the structure of the deal.
In the case of KIT Finance, the restructuring deal has been particularly challenging because of the state's commitment to keeping the brokerage afloat instead of allowing it to be liquidated and the number of government agencies involved in the transaction, said Anton Tabakh, a senior analyst at Troika Dialog.
"Both Russian creditors and entities try to avoid getting involved with the government" in cases of bankruptcy, he said, and in the case of KIT Finance, ensuring the safety of both the brokerage and its various holdings is a delicate process.
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