The SECU reconsidered demands of the creditors of Sumykhimprom

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Yesterday, it was reported that on September 12 the Supreme Economic Court of Ukraine accepted for review complaints from a number of banks, to which the Sumykhimprom SE owes a total of more than UAH 505 mn. This was stated in the court ruling published in the Unified State Register of Judgments.

Among banks which sought consideration of the complaint were VABank (to which Sumukhimprom owes UAH 253.4 mn), Industrialbank (debt – UAH 158.3 mn), Raiffeisen Bank Aval (debt – UAH 2.8 mn), Ukrsotsbank (debt – UAH 31.7 mn), Brokbiznesbank (no information about amount owed is available), the state-owned Ukreximbank (debt – UAH 58.9 mn), as well as the State Property Fund (SPF).

What difference does it make?

This decision is not the victory of the creditors, but rather a chance to win, even though until recently such chances have been absolutely minuscule, according to legal experts. The matter is that earlier courts denied consideration of complaints from the specified pool of banks.

Partner at the SLA Law Firm Oleksiy Volokhov says the banks complained to the courts about Sumykhimprom’s arbitration manager Ihor Lazakovych – a protege of businessman Dmytro Firtash. The essence of the claims was that Lazakovych refused to fulfill the obligations under previously made loans and decided not to give the collateral to repay the debt. Now on September 30 the Supreme Economic Court will consider the cassation appeal to determine whether any violations were committed in the proceedings in the previous instances, explained partner at the Dominion Legal Group Mykhailo Honcharuk in a conversation with Capital.

The banks are trying to receive their money back not only via collective appeals to the courts, but also individually. On August 19 the Supreme Economic Court rejected Sumykhimprom’s cassation regarding annulment of the loan agreement with VABank signed in 2008 in the amount of UAH 23 mn.

The bank’s owner Oleh Bakhmatyuk told Capital that the management of the company was artificially delaying repayment of debts. Sumykhimprom owes his bank the highest amount of money, which is why the bank is the most active in its attempts to get the money back. Industrialbank has recently won a case for recognition of the loan agreement with Sumykhimprom, according to the register of judgments. Such isolated victories suggest that on September 30 the Supreme Economic Court will be on their side. In fact, this will be the turning point in the litigation between the company and the banks.

Consequences for Sumykhimprom

Lawyer and senior partner at Ilyashev and Partners and asset manager at Sumykhimprom Roman Marchenko hopes that the court will take pity on the company, which its current management still keeps afloat, and recognizes credit agreements with banks to be terminated. “In fact, it is a matter of saving the company. If the court overturns the rulings of the lower courts and considers such contracts to be in force, it will give the banks the right to add even higher onerous interests on past due loan payments. As a result, the company’s debt might grow and then no investor will agree to pay it. This may result in liquidation of the company and in fact it will be divided among the lenders. We make every attempt to avoid such a fate. Neither the state nor the staff of the company are interested in such an outcome,” said Marchenko.

He also assures that the rights of creditors are not prejudiced – the debts to the banks were acknowledged, included in the registry and shall be returned in the process of reorganization of the enterprise. Marchenko says that reorganization manager Ihor Lazakovych took advantage of his legal right to terminate the loan agreements, implementation of which per se entailed destruction of the business entity. “The interests and penalties of the banks are simply onerous and they sometimes exceeded 40%,” said Marchenko. In the current state, in his opinion the plant cannot cope with such a debt burden.

Indeed, the results of the current business operations of the enterprise are unlikely to allow it to pay the debt. Even though in July Sumykhimprom was loaded by 80%, it earned only UAH 2.5 mn of net profit. At the same time, over the time of reorganization the company has paid UAH 270 mn in taxes to the budgets of all levels.

Yet such numbers do not convince the Prosecutor’s Office in the Sumy oblast. On the contrary, it believes the official results of business operations of the enterprise are not quite correct. It filed the criminal case against officials of Sumykhimprom because of the sale of company’s products below their cost. The prosecutor’s office appealed to the Ministry of Industrial Policy and the State Property Fund asking to verify the facts of damaging the state’s interests in the sale and purchase of products. “On the basis of request of the prosecutor’s office, the Ministry of Justice of Ukraine ordered the Chief Administration of Justice of the Sumy Oblast to draw conclusions on the presence or absence of signs of fraudulent bankruptcy and concealment of stable financial incompetence of the Sumykhimprom PJSC,” says the message from the Prosecutor’s Office in the Sumy oblast.

As it was reported, at the beginning of September the State Property Fund of Ukraine asked the Prosecutor General’s Office and the Ministry of Justice to investigate the facts of intentional driving to bankruptcy of the Sumykhimprom PJSC. At the same time, the SPF demands removal of the company’s arbitration manager Ihor Lazakovych.