British court suspends Ferrexpo hearings

Britain’s High Court has ruled that hearings on a shareholder dispute in Ferrexpo’s (FXPO LN) key subsidiary, Ferrexpo Poltava Mine (FPM), will be postponed indefinitely until the case is first resolved in the Ukrainian court system, Ferrexpo announced yesterday. Ferrexpo’s board of directors has received legal advice that “the Ukrainian proceedings are without merit.” The dispute is rooted in the 2002 sale of a 40.19% stake in FPM to current Ferrexpo majority owner Konstyantyn Zhevago. The plaintiffs are seeking an annulment and reversal of the deal and the cancellation of a subsequent additional share issues and increases in nominal share values that increased FPM’s statutory fund 115x. We estimate the current value of the claimants’ position at 0.35-14% in FPM’s equity capital depending on what nominal share value is used.

Roman Topolyuk: The long-running dispute now looks set to continue for at least another half year, which heightens legal risks related to FXPO. In the current political environment we don’t rule out the possibility of Ferrexpo receiving unfavorable treatment from the Ukrainian courts, which could bring short-term downside pressure for the stock around the next court date, scheduled for mid-June.