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Russia: Regions Resist Takeovers From Moscow

  • John Helmer



Moscow, 23 September (RFE/RL) -- Although the western press has been portraying recent fights over Russian steel company ownership as issues of reform and shareholder rights, the latest court rulings indicate the contest has more to do with regional resistance to Moscow takeovers.

In Lipetsk, the regional arbitration court has rejected claims by interests associated with Uneximbank and U.S. investor George Soros to control a majority of voting shares in the Novolipetsk Metal Kombinat. Further court rulings are expected on the steel company's challenge to the legality of other shareholdings by the Uneximbank-Soros group; and on appeals which the group has filed.

In Kemerovo earlier this month, the management of another major steelmaker, West Siberian Metal Kombinat (Zapsib), has expressed confidence it will prevail against one of its creditors, Alfa Bank, which has gone to the regional arbitration court to overturn a set of rulings on appointment of a special administrator for the ailing company.

Anatoly Reutov, Zapsib's deputy general director in charge of development, told RFE/RL that a meeting of shareholders and creditors will be held this week to decide whether to approve a business recovery plan prepared by special administrator, Andrei Voronin. Details are not available, but it is known the Zapsib management is in favour, while Alfa Bank is opposed. A few days ago, the bank won from the court a ruling overruling an earlier decision to appoint Voronin. Alfa Bank had earlier proposed its own candidate for administrator, and opposed Voronin on the ground he is too close to the management, and to other creditor banks.

A source close to the Kemerovo region administration says he "doesn't know why this [latest ruling] happened. It shouldn't have happened." He said the Kemerevo region wants to play a major role in restructuring the steel plant. It needs $250 million of investment, plus $100 million in operating capital. But he said no-one will give it lines of credit until the wrangling over the bankruptcy issue is resolved.

He also told RFE/RL that the region, as well as the Zapsib management, believe Alfa Bank wants to mobilize its political connections in Moscow to force Zapsib into bankruptcy, buy its profitable assets cheaply, and take control. The regional administration, headed by Aman Tuleyev, opposes this, and has created an alliance against Alfa that includes Kuzbassprombank in Kemerovo, and Tokobank in Moscow, which are also major Zapsib creditors.

Voronin told a meeting of the banks last week that since he took charge on 24 June Zapsib's rolled steel production grew from 240,000 tons in June to 275,000 tons in July, and 271,000 tons in August. He also announced that monthly losses have decreased from $13 million in June to $5 million in August.

Although the new administration has managed a modest recovery, the debts of the plant continue to grow, and are now reported to be $950 million. This is so great that, according to Pyotr Karpov of the Federal Bankruptcy Agency in Moscow, the special administration regime is inadequate. He said his agency favors formal bankruptcy, with the sale of the plant by tender, and new management appointed by the new owners. This is also the Alfa Bank view.

Tokobank, which ranks ahead of Alfa in terms of charter capital, and behind in total assets, says it has "more or less the same understanding as Alfa Bank" on what measures should be taken to raise production, cut losses, and restore profitability. But Tokobank officials told RFE/RL they "want no part in the machinations involved in the management of the company. The bank said it hopes this situation will stop as soon as possible, because there are numerous financial partners who are interested in cooperation with Zapsib, including Tokobank itself.
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