KDD gets new strategic investor

KDD Group (LSE: KDDG LN, N/R), one of Ukraine’s leading real estate developers, announced that Andriy Verevsky, the key shareholder of Kernel Holding (WSE: KER PW, N/R), bought a 68.2% stake in the company for USD 16 mln. The deal implies a market capitalization for KDD of USD 23.5 mln (GBP 14.7 mln), well below Monday’s market close of GBP 21.2 mln. Alexandr Paraschiy: Given KDD’s tiny cash balance and high debt, the arrival of a new strategic investor is the only option for the company to revitalize its business. As of end-1H11, KDD reported a mere EUR 4 mln in cash on balance and EUR 108 mln in debt (bank loans), with the bulk of obligations maturing in 2013. All KDD’s projects are currently in the early stages and do not generate any meaningful cash flows. The company’s 1H11 revenues stood at EUR 0.2 mln and net operating cash (before change in working capital) was negative EUR 2.0 mln. We think the chances are high that the new strategic investor will decide in favor of a new share issue to inject liquidity into the company, implying possible dilution of minority shareholders who might be reluctant to subscribe in the current market environment.