Kaskol indicate active investment

Published: 4/28/2000

ZAO GK Kaskol, a financial holding company has acquired a shareholding of 16% in Ulyanovsk carrier Volga Dnepr for an undisclosed sum, although a 34% holding in the company was sold last year by Aviastar to NIK, an insurance subsidiary of the cargo carrier, was estimated to be worth $10m by some sources. Kaskol has interests in a number of aerospace producers including Sokol and Rosvertol, the former having a holding on the company, with additional investments in shipbuilding and heavy engineering , The decision to sell the stake by the Ukrainian authorities was reportedly made in early 2000, but according to reports, required an independent valuation of the company. From the Kaskol side, Sergey Yevdokimov, has been quoted as saying they had been negotiating the possibility of taking a stake for over a year. The airline recently reported sales up by 25% in 1999 with revenues reaching $103m according to General Director Alexei Isaikin. The company is unspecific about profits, beyond saying that unspecified margins are 10% and that profits grew by 10% in 1999. Kaskol"s holding has come in two parts, one from a group of smaller group of investors contributing 6% of the holding with the balance coming from engine maker Motor Sich"s holding in the company. The latter being state owned, although slated for privatization recently, with its stake is managed by the Ukrainian State Property Fund. The relationship between the two companies has existed for some time according to Sergey Shorokhov of VD. It appears primarily through the leasing of 2 An-124-100 in August 1999 from the now defunct Titan Cargo in which Kaskol has a shareholding, which operated out of Ulyanovsk and the acquisition of another 2 An-124-100 airframes under construction at Aviastar, the first of which is due to be delivered later this summer. The two aircraft now being operated by the VD/Heavy Lift JV, with one it appears, continuing to be leased from Kaskol. The future development of the relationship appears to be that Kaskol is not planning a passive investment and will bring its management and industrial experience to develop the strategy for the cargo carrier, which although it has a robust business, according to Isaikin, has significant challenges ahead. Particularly if it is to maintain its claim of 52.7% share of the global heavy lift market, reported to be worth $300m in 1999, according to the UK based European Institute of Transport Management and growing at 13% a year until 2003.The balance of the market being held by Antonov Airlines with 40.1% and Polyot Airlines. The immediate and specific challenge for VD, according to Isaikin at a press conference at the end of March, is the $15m the airline still has to spend on seven aircraft to meet noise reduction standards outside of Russia. The future of the company"s shareholding remains uncertain, as Isaikin indicated at the end of March that he expected a further sale of stock by Aeroflot, a 4% shareholder, and was reviewing the possibility of attracting outside investment. VD"s primary customer is the United Nations and relief activities account for 15% of the company"s total business. The next largest clients are broker Chapman Freeman with 10.7% of sales and Curtis Air Services with 6.7%.

Article ID: 1560