Ukraine acting to place Ferrexpo CEO under worldwide search

Kostyantyn Zhevago, the CEO and majority owner of
Ukraine’s largest iron ore pellet exporter Ferrexpo (FXPO LN), was put on a
wanted list in Ukraine by the State Bureau of Investigations (DBR), according
to DBR Head Roman Truba, as cited by Interfax-Ukraine on Oct. 9. The DBR is
taking measures to put Zhevago on an international wanted list, Truba said.

The search is related to Zhevago’s possible
involvement in the embezzlement of USD 113 mln from
the Finance & Credit (F&C) bank in 2015, Truba said, reiterating DBR’s earlier report of Sept. 27
that Zhevago was served, in absentia with a notice of suspicion related to the
embezzlement investigation. Ferrexpo reported on Sept. 30
Zhevago’s rebuttal of having been properly served
with the suspicion notice in  accordance with Ukrainian law. Zhevago was
the controlling owner of F&C Bank until it was declared insolvent in September 2015.

Dmytro Khoroshun: We continue
to expect Ferrexpo’s board to rise to the occasion and to guide all of the
company’s shareholders through this crisis. In particular, reinforcing the
company’s management with people independent from Zhevago might lower the
execution risks without undermining the majority owner’s authority as the CEO.

The outcome of the investigation that reportedly
involves Zhevago as a suspect is difficult to predict. Looking for less
dramatic scenarios, we note that in mid-December, the process of F&C bank’s
liquidation either will end or will be extended for a maximum of one year. The
end of the liquidation process, once it has taken place, might clarify Zhevago’s
risks and possibly lower his exposure related to his bank’s failure.

This crystallization of Zhevago’s risks might, in
turn, make him more inclined to settle amicably the amounts related to various
investigations and court proceedings, including the embezzlement of USD 113 mln
and UAH 1.5 bln (about USD 60 mln) on a loan from the National Bank he personally guaranteed.