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Concorde Capital Research: Bakhmatyuk repays USD 507 mln, awaits NBU reply on debt offer

February 14, 2018 | Cbonds

Oleg Bakhmatyuk, the sole owner of Ukrlandfarming (UKRLAN) and majority shareholder of Avangardco (AVINPU, AVGR LI), is still awaiting feedback from the National Bank of Ukraine (NBU) on his offer to restructure his debt, he said in an interview to Interfax-Ukraine published on Feb. 13. He said he is ready to repay debt to the NBU and the Deposit Guarantee Fund during the next ten years, suggesting a minor interest rate without any more specifics. He estimates his current debt to the NBU and the guarantee fund at UAH 19 bln (though Ukrlandfarming mentioned a UAH 20.6 bln debt a year ago). Bakhmatyuk complained to Interfax that the NBU has not responded to his offer, again mentioning resistance from Valeria Gontareva, the de jure NBU head. The fund is also not cooperative because the NBU is “heavily influencing it by managing its supervisory board," he said.

Also Bakhmatyuk reported he is in negotiations with the external creditors of Ukrlandfarming, claiming that the “loans of external creditors are secured” and in fact “Bakhmatyuk is a hired manager in service of creditors.” On top of that, he stated that he has repaid USD 507 mln to external creditors “in recent years.”

Alexander Paraschiy: It is very strange to hear that Gontareva, who has not been running the NBU since May 2017, remains the key troublemaker for Bakhmatyuk. Also it is strange to hear that the NBU is heavily influencing the guarantee fund. In fact, just two of the five members of the fund's Administrative Council represent the NBU. Most likely, the core reason of their resistance to the deal with Bakhmatyuk is a lack of trust. Perhaps this is also a reason why Ukrlandfarming and Avangardco have failed, so far, to agree on debt restructuring with their Eurobond holders.

We continue to believe that any restructuring deal should end up with the presence of major creditors in the controlling bodies of Ukrlandfarming and Avangardco. And we are surprised to hear from Bakhmatyuk that some “international creditors” are already “controlling” the business that Bakhmatyuk is “managing”. Such claims don't look credible, but Bakhmatyuk could be hinting that some positions in his companies’ controlling bodies are already occupied by creditors. Also it was strange to read that Bakhmatyuk has repaid over USD 500 mln to some creditors in recent years, whereas since late 2016, it has not been paying even coupons on its USD 760 mln in bonds.

All in all, we did not find any new signs of Bakhmatyuk’s readiness to agree on debt restructuring in the interview, at least with the bondholders, the NBU and the guarantee fund.

Issue: Ukrlandfarming, 10.875% 26mar2018, USD

StatusDefaultCountry of riskMaturity (option)AmountIssue ratings (M/S&P/F)
redemption defaultYesUkraine03/26/2018500,000,000 USD-/NR/Withdrawn

Company: Ukrlandfarming

Full company nameUkrlandfarming Public Limited Company
Country of riskUkraine
Country of registrationCyprus


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