One of the largest manufacturers in the Ukrainian automotive market announced the start of bankruptcy proceedings.
We have already told that clouds have settled over the JSC Automobile Company Bogdan Motors. The main assembly plant that produced cars, special machinery, and equipment for the Ministry of Defense was turned into vegetable warehouses of the ATB trade network. And the highly qualified specialists who worked there were laid off.
The reason is a significant reduction in government purchases of military and municipal equipment in favor of other countries' products, primarily Belarus and the Czech Republic. If the multi-profile company closed last year with a net profit of 273 million UAH (10.6 times more than in 2018), then this one has a negative balance. Indirectly, the situation can be judged by the total amount of taxes and fees paid: if a year ago it amounted to almost 385 million UAH, then in 11 current months it barely exceeded 120 million UAH.
In fact, the annual debts accumulation and the inability to service previously attracted loans led to the fact that Bogdan Motors is half a step away from bankruptcy. With the filing of one of the creditors—the Financial Company Finwork—the Commercial Court of the Dnipropetrovsk region began proceedings in the case No. 904/6691/20 on the largest automotive company in Ukraine bankruptcy.
"The conditions that the machine-building industry in Ukraine is now surviving in are the most unfavorable in the last two decades," says an unnamed press release from Bogdan Motors. "The past year was a record one in terms of an adverse factors combination for vehicle manufacturers. This happened due to a combination of systemic problems in the industry, in the country's economy and due to the global crisis caused by the COVID-19 pandemic. The machine-building industry, as expected, became the "Cinderella" of officials and legislators, since not a single draft law to support and develop domestic production was adopted."
In November, the fifth of Bogdan's most important assets, the Megaterm concern (Mega Auto Logistic) that was at the same time one of the corporation’s largest shareholders and the guarantor of Bogdan's debt obligations to Ukreximbank, the corporation's main creditor, underwent a similar procedure.
"Domestic producers never got access to cheap finance that could significantly increase the enterprises’ production capacity and increase working resources," the press service sums up. "Getting loans to ensure the government orders fulfillment is still a problem. In return, the state is doing everything to question the loans already received."
It is about the case initiated a year ago by the capital's commercial court (No. 910/18605/19) in the interests of the Cabinet of Ministers and Ukreximbank "on invalidating the agreement of June 21, 2018 on restructuring the defendant's obligations to Ukreximbank to repay 1.3 billion UAH of debt by December 25, 2031". According to the automobile manufacturers, the prosecutor's office is delaying the case consideration due to a lack of reasoning, damaging the corporation's reputation.
"We have repeatedly said that the loan was taken for the plants’ construction," the press secretary of the concern Serhii Krasulia commented on the restructuring. "But in the conditions of the car market’s catastrophic collapse, the financial crisis, the hryvnia devaluation, the lack of state support and funding, this led to the fact that we were unable to service the loan. And the bank considered our request favorably." In the middle of last year, NABU conducted a pre-trial investigation on the possible abuse of authority by a number of Ukreximbank top officials. In particular, the detectives were looking for "evidence of unjustifiably loyal loans and other contracts and additional agreements to them that led to the bank’s most difficult financial situation. And this bank, we recall, according to the NBU classification, is one of the three systemically important banks in the country.
The Head of Ukreximbank, Alexander Gritsenko, who approved the restructuring and whose appointment was lobbied by President Petro Poroshenko, was detained by Prosecutor General's Office of Ukraine in November 2019 on suspicion of creating a criminal organization, embezzling property, and money-washing of $506 million.
"The announced January lockdown in Ukraine will have every chance to finally bury the Ukrainian economy," Bogdan Motors said in a statement. "Because apart from loud statements that only increase panic and expectations, no systemic steps are being taken to support the economy’s manufacturing sector."
- "UniCredit Bank AG"
But Ukreximbank is not the only financial and credit institution that has claims to Bogdan. Thus, on September 28, the Supreme Court upheld the ruling of the Kyiv Court of Appeal (case No. 824/198/19) on the decision implementation of the International Arbitration Court of the International Chamber of Commerce on the claim of UniCredit Bank AG to recover from Bogdan Motors debt in the amount of 11, 4 million euros.
- Ministry of Defense of Ukraine
In parallel, NABU and SAP (Specialized Anti-Corruption Prosecutor's Office) are investigating "the embezzlement of state property on an especially large amount by officials of the Defense Ministry and the General Staff of the Armed Forces of Ukraine in 2015-2018 who introduced special vehicles into the state defense order and purchased it at inflated prices." As part of the investigation, on October 17, 2019, the owner of Bogdan, Oleh Hladkovskyi, was detained while trying to fly to Brussels for the Bus World exhibition opening. Earlier, he was informed of a suspicion of violating Criminal Code articles (part 2 of article 364 and article 366-1) on the income concealment and abuse of authority. And he is incriminated causing losses to the state in the amount of 17.4 million UAH.
"It is about the purchase of MAZ trucks for the defense sector needs. They were re-branded into Bogdan automobiles passing through a screwdriver assembly at Hladkovskyi’s enterprise," commented people's deputy Serhii Leshchenko on the arrest version. "He ensured these trucks inclusion in the state defense order and subsequent purchase without a tender and in the presence of a clear conflict of interest. In 2015, 120 trucks manufactured by Bogdan were supplied under this state order. In subsequent years, the order volume increased to 150 pcs/year. At the same time, the Ministry of Defense refused from Ukrainian KrAZ trucks (their cost is 10% lower, plus KrAZ gave a guarantee for five years, and not two like Bogdan).
Every sign indicates that the company of Mr. Hladkovskyi will repeat the path of the once largest European truck manufacturer, HC AvtoKrAZ—being left without government orders, it went bankrupt last month.