All Motor Sich shares are arrested, SBU claims

A local court in Kyiv ruled to arrest all assets and all
shares of the aerospace firm Motor Sich (MSICH UK), Ukraine’s Security Service
(SBU) reported on March 20. The court ruled to pass all the property under the
management of the National Asset Recovery and Management Agency (ARMA), the SBU
stated, without clarifying exactly what property has been passed. On the same
day, state industrial military holding Ukroboronprom announced that it had
already sent a letter to ARMA declaring its readiness to operate the assets of
Motor Sich.

The SBU stated that it is investigating two different
cases concerning Motor Sich. One is related to alleged sabotage and subversive
activity in favor of Russia, and the other is related to the possible violation
of the law during the company’s privatization.

Motor Sich, which has been producing aviation engines
since 1916, was the leading engine producer in the Soviet era. The company’s
privatization started in 1994 and finished in 2000, when the latest 20% stake
was sold by the government.

On March 11, Ukraine’s National Security and Defense
Council decided to return Motor Sich“to the Ukrainian people … in a legal, constitutional way.”

Alexander Paraschiy: Thus far,
the way Motor Sich has been “returned to people” does not look optimal for
Ukraine’s investment case, especially taking into account that before mid-2017
the company was a local stock market blue chip with a top-2 free float. No
doubt, it is positive that the chance is increasing that Motor Sich will finally
receive a controlling owner that will do its best to preserve the company’s
business. At the same time, the unresolved ownership issue raises the threat of
multiple court battles with the minority shareholders of the company, as well
as with the Chinese firms that reportedly purchased a control stake in the
company in 2016-2017.