Bank Audi sued by IFC
over unpaid $234 million debt

Claim was filed in the UK

The International Finance Corporation (IFC), member of the World Bank Group, has filed a lawsuit against Bank Audi in the Commercial Court of the High Court of England and Wales. This lawsuit, the latest in a series of legal claims faced by Lebanese banks in the UK and elsewhere, is particularly significant due to the nature of the plaintiff being an international organization and a shareholder of the defendant.

DETAILS OF THE LAWSUIT
IFC and its debt fund initiated on July 31 legal proceedings against Bank Audi, demanding $234 million. The claim is based on overdue loans and accrued interest over the past four years. In 2014, Bank Audi secured two loans: £37.5 million from the IFC and $112.5 million from the IFC’s debt fund. The IFC claims that the bank failed to pay the interest due between 2020 and 2024, despite an agreement requiring full repayment by April 2024. The interest rate was set at 6.55 percent annually, with a two percent penalty on late payments.

The relationship between the IFC and Bank Audi dates back several years. IFC had provided funding to increase Bank Audi’s capital and support its expansion, including the establishment of Odea Bank in Turkey. In 2016, the IFC, along with the European Bank for Reconstruction and Development (EBRD), secured a capital increase of 1 billion Turkish Lira (approximately $342 million) for Odea Bank to finance infrastructure projects and support small and medium enterprises in Turkey.

BANK AUDI RESPONSE
In response to the lawsuit, Bank Audi issued the following statement:

Bank Audi was recently informed that International Finance Corporation (IFC) and a fund affiliated with it filed proceedings before the English High Court seeking the full repayment of two-subordinated loan agreements that were signed in March 2014.

IFC’s legal action calls for the following observations:
• As stated in their title, the loan agreements are subordinated and, in Bank Audi’s views, continue to be subordinated following the maturity date of the subordinated loans in April 2024.
• IFC is fully aware that, since October 2019, Lebanon has been experiencing an unprecedented financial and economic crisis, which the World Bank, IFC’s parent organisation, described as “one of the world’s top ten, possibly top three, most severe economic collapses since the 1850s”. Depositors at Lebanese banks, including Bank Audi, who are senior to the IFC’s subordinated loans, have been unable to recover their U.S. Dollar deposits in unrestricted funds.
• On March 27, 2024, the Central Council of Banque du Liban, the highest authority of Lebanon’s Central Bank, issued a decision restricting the repayment of IFC subordinated loans pending the passage of a bank restructuring law.
• Historically, Bank Audi and IFC maintained an excellent business relationship, with IFC having extended multiple facilities to Bank Audi and its subsidiaries, the proceeds of which were deployed for the development of the Lebanese economy and the economies of other countries. With the exception of the subordinated loans, Bank Audi honored all its financial commitments to IFC.
• IFC is a shareholder in both Bank Audi and Odea Bank, Bank Audi’s Turkish subsidiary. To date, IFC and its affiliated fund have received in excess of $66 million in interest payments under the subordinated loans. Bank Audi only stopped paying interest on the subordinated loans in 2020 due to the lack of free profits, a condition for the payment of interest. IFC also received significant dividend payments on its shareholding in Bank Audi over the past years.

In spite of the above, IFC is now insisting on repayment in full (with interest) of the entire principal amount of the subordinated loans, disregarding their subordinated status, the hierarchy of claims, the Central Bank of Lebanon’s expressed restrictions and indeed, IFC’s mission and values, including the following: “Integrity – We do what is right.”

Bank Audi shares the conviction that the World Bank and IFC have a significant role to play in Lebanon’s emergence from the severe crises it is currently facing. However, Bank Audi has no choice but to vigorously defend itself against IFC’s claim, in the interests of all its stakeholders including, above all its depositors.

[END OF STATEMENT]
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OTHER LEGAL CASES AGAINST LEBANESE BANKS IN THE UK

Since 2022, several cases have been filed, worth $280 million, including:

February 2022: Vatche Manoukian sued Société Générale and Bank Audi for failing to transfer funds from Lebanon to accounts in Geneva.

August 2022: George Bitar won a case against Bank of Beirut for the transfer of $7.8 million to the UK, with the court awarding him the amount plus nine percent annual interest.

August 2022: Bernard Nassif sued Bank Audi for failing to transfer over £1 million to his HSBC account in the UK, in addition to canceling checks valued at £960,000 and €238,000.

June 2023: Mohammad Al-Asaai, a Saudi national residing in London, sued Bank Audi for refusing to transfer £23.8 million to his Swiss account, demanding a nine percent interest on the delayed payment.

August 2023: Hadi Kalo won a case against BankMed for the transfer of $2.5 million to his UK account.