Bank rejects payment and demands stock (550 words)

Published: 12/15/2000

It seems that MVZ is trying to get rid of its largest creditor MIB (Interregional Investment Bank) and has unilaterally attempted to swap its debt for an undisclosed cash payment financed by a 165.5m ruble ($6.5m) loan from the state owned State Investment Company (Gosincor). Reported to be at odds with the company's new temporary management led by Vladimir Bogocharov, MIB (Interregional Investment Bank) has expressed its displeasure at the deal and has refused to accept the terms, despite the fact that according to MIB's Chairman Igor Kruglikov, the money had already been transferred into their account. The bank has reiterated that it wishes to swap its debt for the 25% of the company's stock that would accrue to them under the proposed issue after the rescheduling of the company's debts. Leaving them with a blocking interest and the state without its target of a post issue controlling interest. MIB's Deputy Chairman Sergey Surov suggests that despite the claims of Gosincor's Chairman Yury Petrov, that the loan has made them almost the company's only creditor. MIB estimates the total debts of the company exceed the loan and stand at 300m rubles. Leaving the clear implication that Bogocharov's is using his Moscow contacts to rid himself of the bank and the five seats it currently holds on the seven-man creditor committee; to negotiate a more favourable solution of Mil's status and ownership for the state and management. MIB further claim that the acceptance of the loan by MZV is illegal, as it did not pass through the creditors committee, which has the right to approve actions that will increase the company's indebtedness. The MIB's peevishness at the possibility of being closed out at the deal seems to largely stem from the loss of the leverage gained by potentially having a blocking vote from the issue of further share in exchange for debt. MIB acquired 46% of the company's debts over the last few months from the bankrupt East West Bank, the Lyubertsy affiliate of Moscow's Unikombank (9%) and the Zverev Plant in Krasnogorsk (7.2%) for the purpose of potentiallt securing the holding. What financial benefit they see in the holding is difficult to assess, although the cost of the debt would have been low, MZV has some interesting property assets and hold the rights to the design of some of the world's most numerous helicopters. Commenting on their plans for the plant, Gosincor said that they intended to float sufficient equity to finance the repayment of their loan, but had promised to invest a further $25m once it had obtained a controlling stake after the restructuring. For his part Bogocharov made it clear that his objective along with bring the plant out of bankruptcy was to recover control of the plant for the government for the “country's benefit” and made it clear in a statement that he considered the loan of 165.5m rubles covered the plant's outstanding indebtedness to non government creditors. Founded in 1993 Gosincor is reported to have holdings in a number of Moscow banks including a controlling interest in Guta-Bank having purchased 30% from AFK System. They have further interests in banks and insurance companies and according to Petrov, a former head of the Presidential Administration, have been building their industrial holdings since 1999.

Article ID: 2246