Ukrlandfarming owner hopes to resolve debt issues with NBU under new head

Agricultural tycoon Oleg Bakhmatyuk is striving to
find common ground with Ukraine’s central bank under the management of its
newly appointed governor Yakiv Smoliy, the businessman told the
Interfax-Ukraine news agency on March 15. Last year, Bakhmatyuk – the owner of
farming holding Ukrlandfarming (UKRLAN), top egg producer Avangardco (AVINPU,
AVGR LI), as well as two failed Ukrainian banks – blamed former central bank
head Valeriya Gontareva for a personal vendetta against him that has prevented
him from resolving their conflict. In particular, he complained that the
central bank was ignoring his proposal to restructure all his debt.

With its new head, Bakhmatyuk said he is hoping for a
compromise that will allow him to repay over UAH 10 bln to the central bank in
ten years. Bakhmatyuk claims that under such a scenario, the central bank will
get a better debt recovery rate than selling it “on the conditions of the
Deposit Guarantee Fund,” or at about 10% of par.

In her outgoing speech to parliament on March 15,
Gontareva made particular mention of Bakhmatyuk as the biggest debtor to the
central bank who owes UAH 10.2 bln (about USD 380 mln) in refinancing loans
took by his two failed banks.

Alexander Paraschiy: In our view, Bakhmatyuk’s debt issue to the central bank should be
considered as part of the resolution of his total debt to all creditors and
government institutions, which is at least USD 1.9 bln (based on Bakhmatyuk’s
claims) and up to USD 3 bln (based on rumors). The only source of recovery of
all the debts is Bakhmatyuk’s Ukrlandfarming, which generates no more than USD
150 mln in annual free cash flow. We do not expect Smoliy will adopt any fast
solution to the central bank’s claims against Bakhmatyuk. We also see no value
in the Eurobonds of Ukrlandfarming and Avangardco.