Ukrainian oligarch said to battle Russians for Czech foundry

By bne IntelliNews January 17, 2012

bne -

A fight is hotting up between Ukrainian and Russian oligarchs over control of bankrupt Czech foundry CKD Kutna Hora, reports Czech Position, with the Ukrainian - a member of the Tymoshenko group that appears to be building its influence in the Central European country - apparently in the driving seat.

Leading the chase for the asset is Konstantin Zhevago, owner of Stakhanov Wagon Works as well as co-owner - alongside Czech coal baron Zdenek Bakala - of Ukrainian iron ore producer Ferroexpo. He has reportedly managed to secure a majority on CKD's creditor's committee by buying out the company's debt and is reportedly offering CZK485m (€19m) for the asset.

However, Russian rolling stock manufacturer Rail Group says it's ready to put CZK691m on the table, with a further CZK1.8bn in investment promised to follow.

A meeting of CKD creditors has been called for the beginning of February. "The purpose of the meeting is to negotiate the plans for reorganization that have been submitted and to vote on their adoption," Judge Jitka Drobna, who is overseeing the bankruptcy proceedings, was quoted by the news site E15 as saying.

Whilst the Rail Group offer appears significantly superior, Zhevago is reported to have secured a majority on the commission of creditors through UK-registered firm Integrated Rail-Casting Company. E15 also claims that its sources say Zhevago - who also sits on the board of mining company New World Resources, controlled by Bakala's BXR Group - has persuaded the Czech tycoon to help out.

The coal baron's spokesman flatly denied the suggestion. "Mr Konstantin Zhevago, like the BXR Group, is a shareholder in the Ukrainian firm Ferrexpo and is also a member of the NWR board. Mr Bakala does not have, nor is he developing, any other business activities in the Czech Republic with Mr. Zhevago or firms he controls," Pavel Kosic told E15.

Rail Group and E.On Energie, which were among CKD's main creditors, allege that Zhevago together with former owners and management conspired to bankrupt the company to allow the Ukrainian to buy it on the cheap. Rail Group claims the insolvency proceedings may be biased in favor of Zhevago's company and requested a state ombudsman to oversee the proceedings.

Certainly, the powerful group surrounding former Ukrainian PM Yulia Tymoshenko appears to enjoy a growing influence in the Czech Republic. Tymoshenko was recently jailed for seven years on charges that she abused her office, a move seen as part of a wide-scale attack on the former government by her bitter rival and current President Viktor Yanukovych.

Earlier in January, her husband Oleksandr was granted political asylum by Prague, making him the second member of the faction to be granted that status in the last 12 months following the successful application of former economy minister Bohdan Danylyshyn in January 2011. Reports suggest Mr Tymoshenko has business interests in the country - mainly in real estate via International Industrial Projects - but the details remain sketchy.

Zhevago, meanwhile, is the business star of the Tymoshenko group, a fact clearly not lost on the authorities given that the Ukrainian security service applied high pressure tactics on his various companies throughout 2011.

Like Ferroexpo, Stakhanov is one of Ukraine's highest profile listed companies. However, it's very dependent on the Russian market for its sales of railcars, where Rail Group is one of its competitors. At the same time, it also relies on CKD for supply of parts since Russia withdrew certification of its foundry in Ukraine.

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