The change of temporary managers restarts battle for control (800 words)

Published: 10/19/2000

According to reports, , the appointment of Vladimir Bogocharov on the 16th October as Temporary Manager of Mil Helicopters (MVZ) and the deposing of the incumbent Leonid Zapolsky have severely damaged the creditors agreement negotiated for the bankrupt company. It has also revealed yet another insight into the lack of transparency in Russian bankruptcy procedure for those involved both creditors and shareholders. The dismissal of Zapolsky has reopened a struggle between two factions for control of the temporary management of the plant, which flared up in October and November of last year. The Moscow Arbitration Court at that time confirmed the appointment of the former military officer with little manufacturing experience, in late November having initially rejected him, after a legal battle between management, creditors and the court. Some of the creditors and reportedly the government, favouring the 26-year-old Sergey Belogour, the previous Temporary Manager, who was reputed to have done a good job at the struggling plant. The year despite a successful endorsement of the work of the Zapolsky temporary management by the creditors committee on the 14th of September 2000, The Moscow Arbitrage Court appear to have stuck with their decision of the 10th of August 2000 that they considered Zapolsky unsatisfactory, reversing a decision by a higher court in 1999, that overruled their right to solely appoint the temporary manager as part of their duties as administrator of bankruptcies. The removal of Zapolsky by the arbitration court has therefore surprised MVZ, which according to the press secretary Alexander Gladyshev, had applied for the court to postpone its decision regarding the appointment, which is renewed every twelve months. MVZ is reported to be appealing against the decision. Creditor MIB has refused to comment other than a statement that the hearing lasted only 7 minutes by Deputy Chairman of MIB Serguey Surov. According to the Legal Director of creditor Zverev Plant Vera Chernova, her company was aware of the debt equity swap, but the plan was not discussed at the creditors' meeting and her plant was more interested in cash than equity It seems that other are also may not be happy with the decision, with a report from the Mil press office that the plant's Deputy Temporary Manager Igor Chmykhov, had been attacked and severely beaten resulting in his hospitalisation. It is unclear from reports if the attack was linked to events at the plant. What is clear, is that the flows and eddies of Russian corporate politics are never still or clear. Last year Zapolsky was seen as the management's choice against a state appointee, but he appears to have been displaced prior to the signing of a plan under which the state would gain full control of the plant. The reasons for his dismissal by the arbitration court therefore remain unclear, other than their were reports that a number of creditors, including utility Mezhregiongaz, had worked with the arbitration court to keep Zalolsky out at the end of 1999. The unsigned Zapolsky restructuring plan provided for the conversion of the plant's debt into equity. Leaves its major creditor, Interregional Investment Bank (MIB) with a substantial section of the plant's equity, and along with the state, the major shareholders. Daily newspaper Vedmosti reporting a source close to Zapolsky, said that under the agreement MVZ would have issued additional stock to the state as payment for the intellectual property rights held by the state on the company's designs and to the company's creditors primarily MIB. The outcome after the dilution, would be to leave the state with 50% plus one share, up from 31.5%, and reduce the large foreign ownership of 42% primarily held by Oppenheimer below 25%. The latter being a magical ceiling on permitted foreign investment in companies involved in military development and production. A rule that has of late become increasingly important to the authorities, but was not a major concern when the holding was originally taken. For Oppenheimer it will allow them to reduce a book of disastrous forays into the Russian aerospace industry, that has left them with sizeable holdings in a number of aerospace companies that either ended up bankrupt or untradeable or both. It is unclear exactly what the foreign holding post the issue is maybe beyond the fact that is below 25%. It would seem likely however, that Oppenheimer's holding of 24.2% and that of Sikorsky's 9.38% will have been reduced pro rata. Among the creditors MIB leads the field with 46% of the debt, which it purchased in the summer from the bankrupt East West Bank, Lyubertsy affiliate of Moscow's Unikombank (9%) and the Zverev Plant in Krasnogorsk (7.2%).

Article ID: 2137