Konstantin Zhevago (Read more: KONSTANTIN ZHEVAGO. THE RISES AND FALLS OF A DOLLAR BILLIONAIRE ) is close to finally losing control of his main automobile asset.
At the end of May, it was announced that the State Export Control Service had extended the special exporter status of Europe's largest heavy-duty truck manufacturer, Kremenchug-based PJSC AvtoKrAZ, until June 2019. The company itself states that it currently operates primarily under foreign trade contracts, shipping approximately 75% of its total production abroad (by the end of May, AvtoKrAZ had produced more than UAH 130 million worth of commercial products).
The company is dissatisfied with this figure, stating that "the main factor hindering the main conveyor's operation was the acute shortage of working capital caused by the accumulated debts of customers for products supplied by the company." However, the company adds that "the current financial situation does not affect KrAZ's fulfillment of its obligations."
In reality, things don't look so smooth. Although the company managed to increase net revenue by 10% in 2015, to UAH 1,93 billion, its losses doubled during this time, to UAH 314 million. Total debt exceeded UAH 5,85 billion, including UAH 2,36 billion owed to banks.
The largest share of this is accounted for by the largest state-owned bank in Ukraine, Oschadbank.
As DS reported, this financial institution has been trying in vain for several years to recover a debt owed by AvtoKrAZ totaling approximately UAH 1 billion. Since the company is unable to raise the funds, the bank has initiated legal proceedings against its guarantor shareholders, who have pledged their 56% stake in the Kremenchuk-based holding company. The "lucky" shareholders include Gas Turbine Technologies LLC, Ferrexpo, Prominek, Perth, New Industrial Technologies, Ukrtekhuglerod, Neftekhimimpex, Industrial Construction, Harmonica, and Reaktsionnye Trubi (Reaction Pipes), which, on paper, are owned by extremely unknown individuals—citizens of Ukraine, Cyprus, and other countries. However, according to DS sources, all of these companies are de facto affiliated with a single individual: Verkhovna Rada deputy and founder of the Finance and Credit group, Kostyantyn Zhevago. He is considered the actual owner of the controlling stake in PJSC AvtoKrAZ.
Back in 2014, Oschadbank secured a judgment in the Kyiv Commercial Court for the recovery of a 23% stake in PJSC AvtoKrAZ to pay off a debt under a credit line opened in 2008, totaling over UAH 900 million. This judgment was upheld by the Supreme Commercial Court in December 2014, after which the bank, according to its own information, began preparations for the sale of this stake on the stock exchange. The bank was less fortunate in another dispute. In June 2015, AvtoKrAZ successfully lobbied the Supreme Commercial Court, which overturned the earlier verdicts for the recovery of another 32,5% stake in AvtoKrAZ in favor of the state-owned bank and remanded the case to the Kyiv Commercial Court for a new trial. In March of this year, the capital's court again sided with the bank, ruling that the shares be recovered in its favor. However, thanks to the efforts of Zhevago's automobile holding company, the case was moved to the appellate court, where it remained stalled for several months.
Apparently, Oschadbank has become fed up with the protracted proceedings, as evidenced by its opening of a "second front." As DS has learned, in late May, the financial institution filed a petition with the Poltava Regional Commercial Court to declare AvtoKrAZ bankrupt. The court has already accepted the petition for consideration.
The bankruptcy process at AvtoKrAZ could spell great trouble for the company and its principal owner. And not only because third-party creditors could lay claim to control of the future creditors' committee. Zhevago's plant relies heavily on contracts from Ukrainian government customers, led by the Ministry of Defense. Companies undergoing bankruptcy proceedings are, as is well known, barred by default from participating in government tenders. For this very reason, according to DS sources, the Finance and Credit Group's entities did not risk initiating a managed bankruptcy of AvtoKrAZ to maintain the moratorium on satisfying its creditors' claims. And perhaps, in light of this new threat, this will force Zhevago to intensify its search for funds to pay off its problematic debt.
On the topic: Konstantin Zhevago. The rise and fall of a dollar billionaire.
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