Mil is put in external administration by Moscow court after action over 200,000 rouble debt

Published: 6/21/1999

The Moscow court of arbitration has placed the Mil helicopter plant in Moscow under external administration for twelve months and imposed a moratorium on creditor claims against the company. The Rubezh engineering company, a small creditor, which was owed 200,000 roubles for R&D work undertaken for the plant, initiated the action. Although Mil claim that the payment instruction for this particular debt was lost in the papers of Deputy Chief Designer, Shcherbina. Mil was originally put on 'watch' by a creditor committee, headed by Mr Sergei Belogurov in November 1999. Now the creditors' committee has finally pulled the plug and the business has been placed under external management, with Mr Belorurov as acting head. The committee will decide the final external management team on July 16th 1999. Rumours of mismanagement at Mil are rife. Local newspaper, Moskovsky Komsomoletz, reports that the company has misused funds from a number of sources including Moscow bank, East West, which lent the enterprise $2.5m, and is allegedly also owed $2m in interest payments. The federal budget forwarded considerable sums for the development of the Mil-38, which are reported to have been misused. In particular, the paper accuses the outgoing management team of attempting to divert Mil funds from building rentals for their own use to buy apartments. As of January 1st 1999 the debts of Mil were 137.6 million roubles owed to regional, federal authorities and to employees. Additionally 16 million roubles were owed to the Coty of Moscow and 30 million roubles owed to the utility companies. Recently debts overall are reported to have grown to around 300m roubles ($11.5m) and wages continue to remain unpaid for over 10 months. Mil is however, owed substantial payments by a number of customers particularly the Ministry of Defence and the Ministry of Economics. The plant is currently testing the Mil-24 upgrade (www.concise.org 10th March 1999), which has benefited from the Mil-28 attack helicopter developments, and substantially enhances the capabilities of the widely operated attack helicopter. According to the Deputy Chief Designer, Mr Yevgeny Yablonsky, the test on the upgrade should be completed in three months and will then be presented for a test schedule, with the state to be completed by end 2000. The market for upgrades is seen as being substantial and given the shortage of funds for many of the Mi-24 operators, a cheap alternative compared to buying the new generation of attack helicopters. Given the Moscow City authorities interest in keeping large industrial firms afloat, particularly in the defence sector, it seem likely that there will be some type of intervention from Moscow within the 12 months of administration. Efforts are already being made to intervene by the Moscow Duma's Commission of Economic Policy headed by Irina Rukina, who led calls for a transfer of social assets (schools, kindergartens, housing etc.) to the city and regional authorities and the initiation of a process of creating a single structure incorporating the design bureau with the manufacturing units. However, according to a report on TV station, NTV, staff are principally concerned as to whether the external manager, when appointed, will prove capable of completing projects such as the Mi-24 upgrade. Recently the company has had some of it debts paid as the Ministry of Defence has paid some its debts, but now that it is in administration, the courts and the creditors committee will decide after about 5 months whether it continues under administration or it's assets are sold.

Article ID: 607