“This is an attempt to distract public attention from the really big cases in Ukraine’s banking sector. We don’t really understand this game,” the owner of in-default Ukrainian agribusinesses UkrLandFarming (ULF) and Avangardco said during a phone interview conducted through an interpreter.

Earlier this month, the National Anti-Corruption Bureau of Ukraine (NABU) announced it had issued “notices of suspicion” to 10 people in relation to the alleged misappropriation of the  stabilisation loan. Among those being investigated by NABU are Bakhmatyuk and Oleksandr Pysaruk, the former first deputy head of the National Bank of Ukraine (NBU).

“We were already on the finishing line [of a restructuring with the Deposit  Guarantee Fund (DGF)] when those things started to happen, and we were the only former bank owner who came up with a tangible proposal to resolve the situation,” said Bakhmatyuk, who described the latest developments as “illogical”.

Last week, local media reported that the bank’s former owner offered in October 2019 to repay UAH 8bn (USD 330.7m) owed to  the DGF in relation to stabilisation loans received by VAB Bank and Bank Financial Initiative, another defunct bank previously owned by Bakhmatyuk. Under the offer, a UAH 500m guarantee fee would be paid, followed by UAH 1bn in annual repayments.

“But we have applied to the President [Volodymyr Zelensky], we have appealed to the Prime Minister [Oleksiy Honcharuk]. We have requested that they appoint an effective negotiator and we still hope common sense and constructive solutions will eventually prevail,” he continued.

NABU only has jurisdiction over cases involving corruption in government, not cases involving private citizens or businesses, argued Bakhmatyuk. This is why Pysaruk has been implicated in the ongoing investigation, he said.

“This case has been exhaustively investigated and dismissed by court rulings, and the fact that they’ve now reinstated it, they […] brought Pysaruk into the picture to make a big show out of it, a big demonstration,” he said. Without jurisdiction over private businesses, NABU’s case against Bakhmatyuk will fail if the charges against Pysaruk are dropped, he claimed.

Pysaruk is currently CEO of Raiffeisen Bank Aval, the Ukrainian subsidiary of the Austrian lender, and formerly worked for the International  Monetary Fund. He was a key executive at the NBU at the time of Valeria Gontareva’s leadership, when the central bank oversaw major reforms of Ukraine’s banking industry and some 100 lenders had their licenses revoked.

“We understand very clearly that, six months down the road, this case will fall apart in court anyway, but during these six months a lot of damage can be done. And this damage is actually the object of this whole thing being pursued by the people who are behind it,” said Bakhmatyuk.

Last week, NBU issued a statement defending Pysaruk, noting: “Together with the first post-revolutionary central bank management team, he was at the forefront of banking sector reform – the reason for Ukraine’s current healthy, transparent and reliable bank.”

The renewed investigation into VAB Bank comes at a time when international concern is mounting over President Zelensky’s handling of the case of PrivatBank – nationalised during the period Gontareva and Pysaruk served at NBU. PrivatBank’s former owner Igor Kolomoisky is mounting legal efforts in Ukraine to regain control of the bank.

Aligning with creditors

Asked by Debtwire what he would say to commercial creditors of ULF and Avangardco over concerns money owed to them could be used to repay the stabilisation loan debt, Bakhmatyuk said his businesses face being “killed” if the DGF and NBU continue in their pursuit. “Essentially, we are pleading with the Deposit Guarantee Fund, the National Bank of Ukraine and other stakeholders to desist.”

“If they continue pursuing this course of action, all they can do is just kill the company. And if it is killed, then no creditor will ever be satisfied because it only remains valuable as long as it continues to operate, which we’ve been trying very hard to ensure.” Neither ULF nor Avangardco are pieces of “premium real estate”, continued Bakhmatyuk, noting that “any attempts to take those companies over will fail”.

“Our determination is to protect the company, to ensure that it continues to operate. Because if it is destroyed then […] this will be to nobodies’ benefit. No one is going to benefit out of such a scenario, neither the government nor any other creditors. Only those who are really masterminding this hostile move against the company,” he said.

“All we wanted, we wanted a level playing field, we wanted to be given the opportunity of implementing a scenario which would enable us to develop further and meet all our obligations and stay alive,” said Bakhmatyuk, who added that – at this point in time – the company’s creditors are “our allies”, as the best way to protect creditors’ interests is by saving the company.

As well as being value-destructive to creditors, Bakhmatyuk said the NABU investigation will damage Ukraine’s reputation as a potential investment destination. He flagged the significance of his agribusinesses to the broader economy, claiming they employ 27,000 people and are responsible for 1% of GDP.

“You will remember how much ripple the case of Mriya [another privately owned Ukrainian agribusiness, that was ultimately foreclosed on by creditors] caused, even though admittedly Mriya wasn’t as large or as important to Ukraine’s agricultural industry or the economy at large,” he said.

“We are very surprised that now, amid the discussions of an upcoming land reform, it appears completely illogical why our voice is not being heard. But we are certainly going to struggle hard and push ahead in defence of the company,” concluded the agribusiness operator.

This interview was first published by Debtwire CEEMEA on 19 November, 2019 

David Graves Associate Editor Debtwire

David is an associate editor at Debtwire CEEMEA, where his coverage focuses on high yield, distressed debt and restructuring situations across the region – reporting on high profile situations such as Agrokor, Steinhoff and Dana Gas. He previously reported on new bond and loan issuance from the Middle East. Prior to joining Debtwire, David completed an MA in Medieval History at the University of St Andrews.