Russian bank says PIK unable to service loan

Russian property developer PIK Group is out of funds to service the $262 mln (EUR 178 mln) loan that it received last autumn from Vnesheconombank (VEB) , the bank's chairman Vladimir Dmitriyev told the Russian newspaper Kommersant.

'Problems of a technical nature have arisen due to the lack of working capital at PIK to service the loan,' Dmitriyev said, adding that he was confident that the situation will be resolved 'amicably'. The loan matures at the end of November, the paper reported.

PIK is overdue on a number of loans with other banks including international lenders Morgan Stanley and Nomura. The London-listed builder has reportedly mandated Sberbank Capital, the investment arm of Russian bank Sberbank, to advise it on the debt restructuring process.

The developer has significantly reduced its development activities over the past 18 months. In the first half of 2009, it developed 174,000 m² of residential space, down 60% compared to the same period a year before.