Ukrnafta initiates long-term restructuring of tax debt

Обзоры по компаниям и отраслям 17.03.2016 Mark Rollins, the CEO of Ukraine’s biggest oil producer Ukrnafta, announced on March 16 that he has initiated the company’s stabilization plan aimed at restructuring its tax debt. “I am recommending to my supervisory board that the financial restructuring be initiated under the guidance of the existing executive board,” he told reporters. Ukrnafta has tax arrears over UAH 10 bln, or more than a third of its annual revenue. The company cannot pay these taxes in a short-term period, as has been demanded by tax authorities, and is thus asking for a longer restructuring, Rollins said. He provided no details on management’s proposed schedule of restructured tax obligations. The restructuring plan will have to be approved by the company’s board, a shareholder meeting, creditors and a court, Rollins said, with the process taking as long as three months. He identified Ukrnafta’s key creditors as tax authorities, as well as minority shareholders, whom Ukrnafta owes about UAH 2 bln in dividends. Alexander Paraschiy: At this stage, there is no information on whether the government (which has majority in Ukrnafta’s supervisory board and at shareholder meetings) will approve the delay in taxes, which we believe has no viable alternative. A peaceful resolution to the tax issue should be beneficial for the company, which is being targeted with pressure from the state, and even had some of its mining licenses suspended. The deterioration of Ukrnafta’s liquidity, which has prevented it from paying taxes, happened last year, when the company’s receivables increased from UAH 11.0 bln at the year’s start to UAH 17.3 bln in mid-year and UAH 18.7 bln as of end-September. Rollins stepped in as CEO in mid-September only. The previous top management, controlled totally by the largest minority shareholder Igor Kolomoisky, seems to have intentionally deteriorated the company’s liquidity, as a response to the government’s attempt last year to take operating control from Kolomoiskiy. Recall, the Ukrainian parliament adopted a law in January 2015 to reduce the quorum for shareholder meetings to 50%+1 from 60%. This allowed the government, controlling a 50%+1 stake in Ukrnafta, to hold an AGM to re-elect the company supervisory board and CEO.