Former owner of Kreativ, People's Deputy Stanislav Berezkin, refused to speak to journalists about his former company's debts.
CREATIVE scammers: the Berezkin family has robbed private lenders, and now the government is next.
All of the following indicates that Prime Minister Arseniy Yatsenyuk's business team is cynically, hoping for impunity, to rip off state-owned creditor banks.
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The large oil company "Kreativ" has already left private borrowers without money. State-owned banks could be next.
State-owned banks in Ukraine have repeatedly been victims of deals in which a private company takes out a loan, fails to repay the money, and the company itself goes bankrupt, or the collateral magically disappears.
It appears that just such a story could now unfold around Kreativ, a large private sunflower oil producer. The company has taken out over $600 million in loans from private and state-owned banks.
Private bank collateral simply vanished from warehouses. A series of transactions involving the company's other assets is currently underway, potentially leading to state-owned banks losing hundreds of millions in loans granted to Kreativ. And the state-owned banks' losses will ultimately fall on the shoulders of taxpayers.
Ukraine is the world's leading sunflower oil exporter. Its largest producers are companies owned by former Party of Regions representatives Andriy Verevskyi and Stanislava BerezkinaThe latter is still a people's deputy.
And it is precisely his company that is currently undergoing some rather strange developments, which, according to market players, could cause multi-million dollar damage to the state.
One of Ukraine's largest sunflower oil producers, Kreativ, which belonged to Stanislav Berezkin's family, took out $600 million in loans from state and private banks during Viktor Yanukovych's presidency.
The company "Creative" took out more than $600 million in loans from private and public banks.
Investment banker Alexander Parashchy of Concorde Capital believes that such a large volume of loans from state banks could not have been obtained without political connections. "Mr. Berezkin was a member of the Party of Regions. Therefore, he was most likely close to the government. Would he have been able to obtain these loans if he had been in a different party? Unlikely," Parashchy says.
At the beginning of 2015, Kreatyv's loans to state-owned banks amounted to almost 80%, or over 11 billion hryvnias. The company owed almost 7 billion to Oschadbank, 2,5 billion to Ukreximbank, and 2 billion to Ukrgasbank. Another 3 billion hryvnias were owed to private banks. And now the company is unable to repay anyone.
In September, Kreativ, which was virtually on the brink of bankruptcy and negotiating a debt restructuring, unexpectedly announced that the company had changed hands. The situation further unfolded, taking even more of a surprise for the banks. The company began taking steps that have already led to potential losses for private banks of nearly $75 million.
How did this happen? When signing contracts with private banks in 2014, to secure their claims, Kreativ provided sunflower seeds and sunflower oil as collateral, totaling almost UAH 1.4 billion.
When signing contracts with private banks, Kreativ provided sunflower seeds and sunflower oil as collateral.
But the products suddenly disappeared from the warehouses. And now private banks are left with nothing—no money, no goods. The seeds disappeared just as ownership was changing hands, says Sergei Tsarelung of UniCredit Bank.
"We realized that there had been fraud with our collateral, and so we initiated legal proceedings regarding the disappearance of the collateral," he said.
Such behavior toward foreign banks by large Ukrainian borrowers could negatively impact the entire Ukrainian banking system, investment bankers believe.
"We're seeing a situation where foreign banks are leaving the market because their rights are poorly protected, they can't get their funds back, and there's no point in investing in Ukraine," says Mykhailo Demkiv of Investitsionnyy Kapital Ukrayina.
But that's not all. There's a risk that a deal is currently underway that will see state-owned banks lose a large portion of their loans.
Risks of state-owned banks
On December 3, state-owned Ukrgasbank unexpectedly announced a tender for the sale of Kreatyv's loan receivable. Ukrgasbank is the smallest creditor of the three state-owned banks, owing it 2 billion hryvnias. At the same time, the bank acquired Kreatyv's most attractive asset—the Kirovohrad sunflower processing plant, which actually produces the sunflower seeds.
Other banks received assets as collateral: Ukrexim holds a soybean plant, a pig farm, and one grain elevator; Oschadbank holds two sunflower processing plants, two grain elevators, and plants producing modified fats and spreads.
Ukrgasbank has effectively decided to sell the rights to the mortgaged property. This occurred on the evening of Thursday, December 3. Over the weekend, one bid was submitted by a competitor, Kreativ, and now Ukrgasbank's credit committee is reviewing the documents and deciding whether to award the rights to the butter factory to the bidder.
If this happens, state-owned banks may lose the ability to collect the remaining debts from Kreativ, because the oil company will simply cease to exist.
"The Kirovograd plant is the main asset of the entire group. Therefore, if it leaves the group, the group will effectively collapse and will never be able to repay its debts," says Alexander Parashchy.
According to him and other experts, all state-owned banks should join forces, which would significantly increase the chances of loan repayment. However, Finance Ministry officials and state-owned bank representatives decided otherwise. They believe that each bank should resolve the issues with Kreativ's loan separately.
"I hope no one will have any problems. Because as a member of the supervisory boards of two other banks, I can say that each of them is a state-owned bank, but operates completely independently. And the loans were issued independently at each bank, using the collateral they were issued against at each bank," said Deputy Finance Minister Oksana Makarova.
According to Kyrylo Shevchenko, Chairman of the Board of Ukrgasbank, the bank has problematic debt, which is why it decided to sell it. "The bank's problematic debt means that Kreativ currently owes the bank over 95 million dollars. This means the bank is currently not receiving interest on this loan and is not receiving any payments. One way to deal with problematic debt is to sell such an asset," Shevchenko explained.
Chairman of the Board of Ukrgasbank Kirill Shevchenko
Ultimately, the state may lose out. Other state-owned banks may only receive a portion of the more than half a billion-ruble debt, as the sale of the main asset will result in the loss of industrial capacity, and therefore the ability to produce and sell butter.
The remaining assets that the banks received as collateral may turn out to be of little value.
"If we're talking about state-owned banks, there's a significant risk that the value of the collateral is much less than $500 million. Consequently, there's a risk that even if the banks do want to repossess the collateral, they won't be able to get the value they were expecting," says A. Parashchy.
The risk is that Ukrainian taxpayers will be forced to pay for the debts of a private company. If, for example, Oschadbank is forced to write off Kreatyv's multi-million-dollar loans, the state will compensate it by issuing domestic government bonds, as has happened in similar cases before. For example, just this year, the Cabinet of Ministers increased the authorized capital of the state-owned Oschadbank by 11,6 billion hryvnias, to 29,9 billion hryvnias. Most of this money is compensation for the purpose of building reserves for problem loans. In other words, the state is essentially compensating the bank for its lost funds.
The new official owners do not dispel doubts
Unfortunately, neither the new (nominal? – A) nor the former owners of Kreativ were willing to explain to journalists how they planned to return more than $500 million to state-owned banks.
"I invested in this toxic asset because I believe it will be worth more after 'detoxification.' I cannot disclose the details of the restructuring negotiations with the banks," Kreativ's new shareholder wrote in an email.
The former owner, Stanislav Berezkin, left the film crew of the "Schemes" program altogether, hiding under the dome of the Verkhovna Rada.
This behavior, it seems, could be a fitting metaphor for his company, Kreativ, escaping its own obligations. It appears the cost of this escape could fall on the shoulders of Ukrainian taxpayers—meaning us.
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Alexander Chernovalov, published on radiosvoboda.org
Translation: Argument
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