Ukrlandfarming land bank shrunk to 570 kha, Bakhmatyuk says

The agricultural and food holding Ukrlandfarming (ULF,
UKRLAN) controls currently a land bank of 570,000 ha (compared to 605,000 ha
year ago), majority owner Oleg Bakhmatyuk said in an interview to
Interfax-Ukraine published on Feb. 19. The decrease resulted from strong
competition for land plots and the company terminating some land lease
agreements. Bakhamtyuk estimated that the company’s EBITDA was flat yoy in 2017
(vs. about USD 186 mln in 2016), adding that the results could have been better
if the company had access to additional credit resources.

Also Bakhmatyuk reported he is in negotiations with
“about ten” main creditors of Ukrlandfarming, who own about 70-80% of
its total debt. In case Bakhmatyuk departs from the management of
Ukrlandfarming, the company “will disappear within three months,” he said. His
main role is to save the company, to finalize the debt restructuring process,
and after that, to redevelop it.

Ukrlandfarming and its subsidiary egg producer
Avangardco comprise 99% of Bakhamtyuk’s total (cash-generating) assets, he
said.

Andriy Perederey: In the
first part of Bakhmatyuk’s interview published last week,
he estimated that Ukrlandfarming, with turnover of USD 1.0 bln and EBITDA of
about USD 200 mln, can be valued at USD 2 bln, which is hard to agree with. He
also said that his total debt to creditors is USD 1.9 bln, which he is willing
to restructure. However, the total debt of Ukrlandfarming is just USD 1.6 bln
(as of end-2016). As Bakhmatyuk has no other businesses except Ukrlandfarming,
this means that Bakhmatyuk is willing to resolve all his debt issues (including
his personal debt to the NBU and the Deposit Guarantee Fund) at the cost of his
farming holding.

Clearly, this is not an encouraging news for ULF
bondholders, as well as for the bondholders and minority shareholders of
Avangardco (AVINPU, AVGR LI), but this is what they should have expected, as we
highlighted in our previous reports on ULF. In any case, we agree that
Ukrlandfarming may be rescued as a business and may still be able to repay all
its debts (and Bakhmatyuk’s debts). But the necessary condition for creditors
to agree on any deal is their gaining control over the holding’s operations and
expenditures.