Creditors demand Ukraine investigates Mriya shareholders' private deals

By bne IntelliNews October 23, 2014

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International creditors and minority shareholders in financially troubled grain producer Mriya, one of Ukraine’s largest agribusinesses, have called on the president and government to investigate suspicious behaviour by its controlling shareholders, alleging asset stripping.

Grain producer Mriya, founded and controlled by Ivan Huta and his family, has entered restructuring talks with creditors after defaulting on Eurobonds. Creditors demanded early repayment of a $400m Eurobond and loans totalling €49m on October 14, after the company failed to make payments on its debt.

In an open letter addressed to Ukraine's president, government, and other authorities, the creditors said that the goal of such an investigation would be "to safeguard the legitimate rights and interests of creditors and minority shareholders in the company, as well as to preserve its assets and prevent possible abuse”. 

Huta and his wife and children, the company's founders and controlling shareholders, have been acquiring assets across Ukraine and Europe, despite defaulting on eurobond payments, according to creditors. Recent acquisitions made by the Huta family include a bank, a port-side land plot in Odessa, a large dealership, a Swiss-based grain trader, and real estate in Ukraine and abroad, the creditors allege.

The creditors indicate they suspect asset stripping by the Huta family, demanding an investigation into "how the Hutas were able to accumulate considerable private means when the Mriya company was on the verge of bankruptcy," the letter continues.

The Huta family have rejected the allegations, according to newswires.

According to the letter, Mriya's debts total $572m owed to Ukrainian and foreign banks, $472m to investment funds, $122m to the International Finance Corporation, and $109m to European export credit agencies.  The authors of the letter hold over 50% of $400m worth of loan participation notes issued in April 2013, and claim their total investment in the Ukrainian economy is $2.7bn.

Signatories of the letter include CarVal Investors, Franklin Resources, Prosperity Capital, Santa Lucia Asset Management, and Ashmore, owner of bne.

Mriya CFO Oleksandr Cherniavsky said in a press interview on October 22 that Mriya is sticking to a debt restructuring plan and is continuing operations. "We plan to resume payments in November to close the issue of banks' funding," Cherniavsky said, adding that creditors' demand for accelerated repayment was common at initial stages of debt restructuring talks.

Ukraine's economic crisis, triggered by political turmoil and a Russian-backed insurgency in East Ukraine, combined with plummeting global prices for grain, has caused financial difficulties for a number of major high leveraged Ukrainian agribusinesses besides Mriya, such as grain producers Agroton, oilseed producer Creative, and a bank owned by grain and egg oligarch Oleg Bakhmatyuk. Allegations of financial shenanigans have been levelled against Agroton shareholders and Bakhmatyuk by analysts, and in the latter case, also by European politicians.

Bakhmatyuk is now regarded as a likely candidate to buy the stricken grain producer. In comments to Interfax, it said that the acquisition would make sense, since 60% of Mriya lands are contiguous to its own holdings, but that there were no talks being held currently.

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