Shareholders left without dividends
Recently, a 26% stake in the Dnipropetrovsk Comintern Steel Plant has been renationalized by the state, not without opposition from the owners. The Friday before last, an emergency meeting of the plant’s shareholders approved changes in the joint- stock company’s charter and dismissed a number of members from its board of directors, supervisory board, and audit commission. Addressing the shareholders, State Property Fund representative Oleksandr Andrushchenko said the meeting had been called following the restitution of a large parcel (26%) by a buyer company that failed to meet its commitments undertaken prior to the tender. The owner of a 62% interest in the firm, the State Property Fund, has authorized the investment Slavutych-Kapital Company to conduct a meeting of shareholders. The shareholders were offered the agenda allowing the SPF, pending the sale of a controlling stake, to appoint, replace, or dismiss the chairman of the board of directors, as well as disband and elect new governing bodies. The organizers of the meeting proposed that Anatoly Vulykh, board chairman since February last year, be reelected to his present position.
Although the proposals were approved by the overwhelming majority of shareholders, some dissatisfied comments were heard in the hall, predominantly from small shareholders demanding a progress report by the board and payment of dividends. Tensions rose high when the meeting proceeded to elect the supervisory board, with Yevhenia Oleksandrivna Tymoshenko as one of its members. An underage daughter of her well-known parents was introduced by the organizers as a namesake — apparently in an effort to prevent any outburst of public opinion.
To quell the rank-and-file shareholders, board chairman Mr. Vulykh decided to give his account of the saga, saying the 26% stake had been acquired in the past by a Cyprus-based company. “I don’t know who owns the company, Lazarenko, Tymoshenko, or someone else as I have never seen the owners, but the stake was sold by the state against the obligation by the buyers to invest $10 million to build a production line at the steel plant to make zinc-coated pipes.” A part of this investment has been received, making it possible to erect a shop building, build an acid reservoir, and install three cranes. However, no further investment came, for all the assurances by the buyers to meet their obligations in full. The whole episode ended when Ukraine’s Supreme Arbitration Court, following the demand by the Prosecutor General’s Office, ruled to reinstate the stake to the government, allegedly imposing a UAH 50 million fine on the nonresident entity for its failure to meet its liabilities. Now the SPF, owner of a controlling interest again, has replaced the leadership of the form, a signal that the steel plant might change hands in the next few months. Meanwhile, the shareholders elected representatives from the SPF, the plant, the oblast state administration, and Pryvatbank, a major creditor, to sit on the supervisory board.
Despite the fact that the company has repaid part of its debts and UAH 4.7 in debts has been written off on President Kuchma’s proposal, the plant is still in serious financial trouble faced with huge accounts payable mushrooming from UAH 114 to UAH 93 million. “If we go on repaying our debts at this rate, it will take a decade,” the board chairman noted. Employees must be paid wages on a regular basis, or they will seek other employers, while paying out dividends is absolutely out of the question.
It is worth mentioning that the now-struggling Dnipropetrovsk Comintern Steel Plant is by no means a hopeless enterprise. Speaking to The Day’s correspondent, Anatoly Vulykh said that, unlike other Ukrainian steel plants in pipe production, the wear and tear of the enterprise’s equipment is at a mere 27.9%, due to the construction prior to sharing in 1993 of a state-of-the-art plant of gas and water pipes of various diameters. Understandably, this greatly increased the number of suitors eager to buy the plant. But the first attempt at privatization produced meager results, both for the state and ordinary shareholders.
