OREANDA-NEWS. April 16, 2010. The Economic Court of Donetsk region opened bankruptcy proceedings against Yasynuvatsky Machinery (UX: YAMZ UK), according to local news reports yesterday. The case is based on claims that it owes UAH 2 mln in arrears to the pension fund of Ukraine. At the same time, according to Ukrrudprom, the company’s press Secretary Igor Shparber said yesterday that Yasynuvatsky Machinery is in the process of stripping its assets into a new entity, a limited liability company. In related news, the company called an EGM for May 19, where shareholders will consider reorganizing the company from an open joint stock entity to public joint stock entity, according to the requirements of the new law on joint stock companies regarding new share issues. Earlier, at its March 23 AGM, shareholders of Yasynuvatsky Machinery voted for a 2.2x charter fund increase.

Concorde Capital: Apparently, the agenda of the company’s EGM is in conflict with the words of its press secretary. In our view, Yasynuvatsky Machinery is able to repay its debt to the pension fund if this is the will of its majority shareholders, as the amount in consideration is rather small and the company’s D/E was only 0.7x as of Sept. 30, 2009. At the same time, if the information on the company’s reorganization into a limited liability company finds further confirmation, this would mean that Yasynuvatsky Machinery is not willing to pay its debt and is ready to strip its assets to find protection against its creditors. In this case, the company will likely cancel its intended share issue, and the rights of minority shareholders in the open joint stock company will be disregarded. An alternative possibility for the company is to get cash from share issue proceeds, pay off its debts and reorganize into a public joint stock entity. This would only be possible if Yasynuvatsky Machinery manages to secure external investors who would buy out its new share issue, as we doubt that current majority shareholders would be willing and able to put ~USD 10 mln into its equity. Previously, SCM, who controls most of Ukraine’s coal machinery assets, expressed interest in gaining control over Yasynuvatsky Machinery.