State Property Fund expects Prosecutor to support return of Ukrtelecom shares to state ownership

Source : 112 Ukraine

On 8 January 2018, SCM filed an appeal to the Nicosia county court (Cyprus) disputing the freezing of its owner Rinat Akhmetov’s assets worth $820 million.
12:16, 31 January 2018

Open source

Acting Head of the State Property Fund of Ukraine (SPF) Vitaliy Trubarov has said the Fund has filed a request to the Prosecutor General’s Office, should the positive ruling be made by court in regards to the shares in PAO Ukrtelecom, to allow its prompt crediting in the Funds accounts.

He points out that the appeal in the Ukrtelecom lawsuit is expected to be heard on 20 February 2018, and the State Property Fund expects a positive decision that will return the shares into state property, so that they will be further credited into the Fund’s accounts.

Related: Cyprus court froze $820 million of Akhmetov's assets in Ukrtelecom case

“Along with this litigation, there is one more that is related to the shares in Ukrtelecom under the investigation by the Prosecutor General’s Office, which froze the shares which has disabled any transfer of them. We have filed a request to the Prosecutor General’s Office asking them, should the court ruling be positive, which we expect it to be, as that would confirm the previous decisions, to unfreeze those shares, allowing their transfer to our accounts”, - Trubarov posted on his Facebook page.

Related: Akhmetov's company wants to terminate contract of sale of Ukrtelecom

According to him, after the settelement of these shares in the Fund’s accounts, the Fund is going to launch a full asset recognition in order to confirm that the shares are backed by property.

“We are going to compare the property we were selling to what there is now and, should there be any illicit alienation, all the losses will be substracted and be submitted to the operating company”, - he explained.

System Capital Management did not provide any additional guarantees to OOO ESU regarding the issued shares in Ukrtelecom, ESU is solely responsible for the Ukrainian state banks debts.

Related: Company of discord: Ukraine wants to undertake debts of Mr. Akmetov's Ukrtelecom

On 23 April the High Court of London heard SCM’s appeal to the LCIA ruling in dispute against Raga Establishment (formerly known as Epic Telecom Invest Ltd. That was the owner of OOO ESU on behalf of the Austria-based fund EPIC at the time when the state was selling it in 2011) regarding the $820 million purchase of Ukrtelecom.

The Cyprus-based Raga Establishment filed a lawsuit to the London Court of International Arbitration against SCM Financial Overseas Limited (SCM FO) accusing it of paying only $100 million of the $860 million according to the 2013 agreement on the resale of Ukrtelecom. In turn, SCM FO claimed that Raga did not fulfill its investment obligations acquired in the privatization. In particular, it concerns the creation of a telecommunications network for Ukrainian government institutions.

Related: Khoroshkovsky was real beneficiary of EPIC during Ukrtelecom privatization – SCM

In the fall of 2017 Raga received the ruling made by the London court requiring SCM FO to pay it $760 million of the principal debt and $60.4 million in interest and court fees. The request to freeze Rinat Akhmetov’s assets Raga explained by a series of transactions conducted by SCM FO in 2014-2016, which the plaintiff claims were conducted with losses. At the same time, SCM said those transactions were normal commercial practices and the losses were linked to the crisis in Ukrain in those years.

Related: Court of Amsterdam freezes assets of Akhmetov

The Financial Times citing Raga’s owner Denys Gorbunenko, who bought the company in 2013, argued that the case may also involve another prominennt Ukrainian businessman Dmytro Firtash. His Group DF partially financed the purchase of Ukrtelecom at the time of its privatization and Raga owed owed it around $300 million. The newspaper added that although D.Gorbunenko purchased Raga in 2013,the negotiations regarding R. Akhmetov’s purchase of Ukrtelecom began in 2012 “following a request from the then Ukrainian president Viktor Yanukovych. According to Interfax-Ukraine, ex-Chairman of the Board of the insolvent and nationalized Rodovid Bank Denys Gorbunenko has recently been close to D. Firtash, in particular, he attended the Austrian court’s hearing of the case regarding D. Firtash’s extradition to the United States in 2017.

Related: Akhmetov's company to appeal against court decision to "freeze" 820 million dollars

At the beginning of 2011 the State Property Fund sold 92.79% of shares in Ukrtelecom to OOO ESU for UAH 10,58 billion (around $1,3 billion at the time). However, in 2017 the Fund accused ESU of not fulfilling its investment obligations to establish a dedicated government network, and by mid-December it managed to obtain rulings made by two courts ordering the return of 92.79% of the shares into state property. Ukrtelecom’s owner has announced it will file an appeal.

Related: List of Akhmetov’s assets to be frozen by court’s decision

The state-owned Oschadbank and Ukreximbank are also suing OOO ESU, as they bought its bonds worth over $512 million [as of 31.08.2013, $1 = UAH 8.19, -] and are now demanding their redemption and interest to be paid. According to the data from the National Securities and Financial Markets Commission, within the first nine months of 2017, OOO ESU managed to cut its losses by 8.2 times compared to the same period in 2016, to $4.63 billion. However, by the end of September the cumulated uncovered loss reached $245.2 million, no revenues were reported. The company’s main asset is still the long-term financial investment – the shares in Ukrtelecom, whose price was recorded at $1.36 [as of 25.09.2011, $1 = UAH 7.97, -] billion on the company’s balance sheet, according to the sale and purchase agreement from 2011.

Related: Ukrainian oligarch Firtash ventures a new game

ESU’s bonded obligations, which were required to be paid in March 2017, by the end of September of last year stood at $240.5 million [as of 18 September 2017, $1 = UAH 26.69, -], $157 million of which constituted the principal debt. In the nine months of 2017, Ukrtelecom has raised its net profits by almost 2.6 times compared to the same period of 2016, to $23 million.

Related: Ukrainian oligarch Dmytro Firtash to be extradited to U.S.

On 8 January 2018, SCM filed an appeal to the Nicosia county court (Cyprus) disputing the freezing of its owner Rinat Akhmetov’s assets worth $820 million. The case is set to be heard on 27 February, according to an article in the Financial Times citing the corporation. On 27 December 2017, the Nicosia county court ordered the freezing of Ukrainian businessman Rinat Akhmetov’s assets worth $820.5 million following the request filed by Raga Establishment. Raga Establishment is owned by the ex-chairman of the board of the insolvent Rodovid-bank Denys Gorbunenko, and the company accused R. Akhmetov’s SCM Financial Overseas Limited (SCM FO) of underpaying for the purchase of Ukrtelecom, FT reported.


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