SCM and Raga reach settlement in Ukrtelecom dispute

A subsidiary of the SCM Holdings and Raga
Establishment Ltd. “formally and finally settled the dispute” concerning the
sale of Ukrtelecom in 2013, SCM’s press service reported on Oct. 1. The deal
means that all the ongoing legal proceedings shall be discontinued, the press
release clarified. No other details of the settlement have been disclosed.

Recall, Raga claimed earlier it sold a 92.8% stake in
Ukrtelecom to SCM for an agreed price of USD 860 mln, while it only received
payment of USD 100 mln. In May 2018, the London arbitration court ruled in
favor of Raga, thus making SCM liable to pay about USD 821 mln in compensation.
As a part of litigation, some of SCM’s Cyprian assets were frozen between
December 2017 and June 2018.

SCM Holdings is owned by Ukrainian citizen and
billionaire Rinat Akhmetov, while Raga is controlled by a Ukrainian citizen.

Alexander Paraschiy: Besides the
settlement with Raga, SCM will have to resolve an outstanding conflict with
Oschadbank (OSCHAD), which managed to arrest Ukrtelecom’s 92.7% stake pledged
under a UAH 1.8 bln loan to an SCM subsidiary. Ukrtelecom’s value is definitely
much smaller than the amount claimed by Raga (USD 821 mln), also taking into
account the financials claims of Oschadbank and Ukreximbank.

Therefore, there is no reason for SCM to pay that
amount to Raga. Most likely, the new deal assumes a much smaller payment by SCM
(no more than 50% of that amount). As we assumed before, the key source of
funds for a possible payment to Raga could be dividends from Metinvest (METINV).

Now that the conflict with Raga has been resolved,
SCM is able to settle issues with state banks and re-establish its ownership
rights over 92.8% stake in Ukrtelecom.