ULF subsidiary awarded USD 21.5 mln in contract damages

A Zurich district court ruled on March 10 to arrest property rights (receivables) worth CHF 122 mln belonging to the private joint stock company Rise, grain trader Nibulon announced on March 14. Rise is a subsidiary of farming holding Ukrlandfarming (UKRLAN). The arrest was ordered to enforce the arbitrage decision of the Grain and Feed Trade Association (GAFTA) in 2014, which ruled to repay USD 21.5 mln in contract damages to Nibulon, including USD 4 mln in interest accrued.

The decision was in regards to Rise’s contract obligation to supply 158 kt of corn to Nibulon in 2010, which Rise didn’t meet, citing corn export quotas that were imposed in Ukraine. This happened before Ukrlandfarming purchased Rise in 2011. 

Ukrlandfarming doesn’t recognize the obligation and will continue to seek legal protection, a representative told Interfax-Ukraine.

Roman Topolyuk: The potential need to repay USD 21.5 mln, as well as the frozen receivables, is a negative development for the liquidity of Ukrlandarming, which generated negative net operating cash flow in 9M15 of USD 16 mln (after all interest payments), and is relying on working capital to fund its day-to-day operations, while having USD 448 mln in current debt (28% of total).

The company has to pay a USD 27 mln in coupon on its USD 500 mln Eurobond by the end of March, and is negotiating with a group of large bondholders regarding potential amendments to the bonds, according to Debtwire. This confirms our bearish view on UKRLAN bonds.