Ferrexpo court win not necessarily for company benefit only

The Kyiv Appellate Economic Court on Aug. 3 published
its full decision on the July 18 victory of Ferrexpo
Poltava Mining (FPM), a subsidiary of Ukraine’s largest iron ore pellet
exporter Ferrexpo (FXPO LN, FXPOLN), in its case to boost its claim against
Finance & Credit Bank to UAH 3.9 bln (USD 144 mln) from UAH 485 mln (USD 18
mln).

Recall, in October 2017, FPM lost the
first-instance court hearing of this
case. During this hearing, it was revealed that FPM voluntarily signed several
suretyship agreements in relation to various loans extended by Finance &
Credit Bank to third-party companies controlled by Ferrexpo’s majority owner,
Kostyantyn Zhevago. In August 2015, the bank transferred UAH 3.4 bln (USD 126
mln) from FPM’s account to a special transit account based on these agreements.
However, the appellate court found FPM’s suretyship agreements void because it
was not presented with the originals of these agreements.

The court also found that FPM is not a related party
for Finance & Credit Bank because the documents that the court had were
insufficient to decide otherwise. As a non-related party, FPM should be a
seventh-priority creditor of the bank (defined as non-related legal persons
that had deposits), the court found. Previously, FPM’s position in Finance
& Credit Bank’s list of creditors was as a ninth-priority creditor (related
party depositors).

Dmytro Khoroshun: Just as the
FPM’s decision to sign the suretyship agreements with Finance & Credit bank
in August 2015 was difficult to interpret in terms of Ferrexpo’s general
shareholder interests, this recent court victory will not necessarily end up as
beneficial for all of Ferrexpo’s shareholders.