Konstantin Zhevago Made an Unprecedented Business Move
OREANDA-NEWS. On 7 February 2008 was announced, that Konstantin Zhevago, a co-owner of Finance and Credit group, in order to buy Kremikovtzi AD made an unprecedented for domestic businessmen move – he pledged the core asset of the group – Ferrexpo Plc mining company.
According to the statement made by Ferrexpo on London Stock Exchange, the pledge agreement was signed on January 1, between Fevamotinico S.a.r.l., controlled by Mr Zhevago, and Deutsche Bank London Branch. Its subject matter became 443.326 mn shares of Ferrexpo, which corresponds to about 73.1% in the capital of the company. Taking into account their quotations on Friday 4 close at the level of 2.57 British pounds, the market price of this stake is about $2.247 billion.
Pramod and Vinod Mittal, the current owners of the company, purchased a 71% stake in the company via their Global Steel Holdings in 2005. According to the experts, the deal amounted to about EUR 100 mn. Pursuant to the business plan, within 4 years the company planned to invest about $300 mn into the steelmaker development, which would allow to produce about 2 mn tonnes of metal products a year. However, according to the management of the steelmaker these plans were frustrated by deterioration of situation in the global financial markets.
At the end of January, Alexander Tomov, executive manager of the company, informed that the negotiations on sale of 71% stake to Konstantin Zhevago were completed by 90%, after which the Ukrainian businessman met with the Bulgarian prime-minister and confirmed its readiness to invest into the company. It is interesting, but the executive manager has already lost his position and quite probably – due to excessive chattiness.
However, in early February, the Bulgarian ministry of economy and energy informed that the possible deal on sale of Kremikovtzi AD is postponed due to the position of its owners and creditors. The ministry got a notice from QVT Fund, one of the largest owners of 7-year bonds for ?325 mn that mature in 2013, that the stake in the steelmaker, controlled by Mittal brothers via Global Steel Holdings Ltd., was pledged. The bonds holders asserted that bonds had a default and informed about their intention to participate in talks about the company sale and the deal terms and conditions. It is not excluded that Mr Zhevago in order to buy out these bonds pledged the pearl of his business empire. However, the well-informed sources say that recently, Finance and Credit experience difficulties with cash and that it is even forced to sell its assets. And now – this desire to buy the steelmaker in Bulgaria, plus the potential project with Azovmash that will also require significant funds (they say that Alexander Savchuk – the owner of Azovmash, and Konstantin Zhevago may merge their machine engineering holdings).
Meanwhile, Kremikovtzi AD denies accusations of breaching its bonds commitments. In addition, Pramod Mittal in the course of the meeting in the ministry of economy and energy held on February 1, informed about his plans to attract a financial advisor for the company sale. According to him, the advisor will need 3-6 months to perform its assignment. Yesterday, it became known that the advisor will be the investment bank – Merrill Linch.
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