MDM Financial Group has bought out the Kaliningrad Region's debts of USD 15.5 million (including interest) to one of the leading European banks and is now taking steps to obtain this sum from its debtor. According to MDM press office the deadline for repayment was February 12, 2003.
The press office did not specify about the identity of the European bank. However, a source has said that a loan of USD 10 million from the Dresdner Bank in 1998 to the regional development fund of the Kaliningrad Region under a guarantee from the local administration is at issue. During the loan period the debtor did make some interest repayments but then refused to repay the loan itself.
Until now the bank was unable to obtain repayment of its loan from the Kaliningrad administration and sold the loan to a company which is close to MDM Financial Group. The Kaliningrad Region allegedly refused to repay the loan in view of a legal infringement when the loan deal was registered and also due to economic difficulties in the region, according to the MDM press office. 'However the previous administration investigated this matter, even taking it to the regional courts, where they ruled that the deal was legal and that the creditor's demands were valid,' the press office announced.
The press office added that the Kaliningrad administration had persistently refused to negotiate and as a result MDM Financial Group had decided to initiate court proceedings against the Kaliningrad Region.
'The legal process will not only damage the region's reputation, it will also significantly raise the sum which the region already owes. Court fines will increase the region's debts by USD 3 million which could force the Kaliningrad Region to declare its failure to meet its financial obligations,' said Yuri Kriukov, a representative of the MDM Bank management, which is a subsidiary of MDM Financial Group.