INVESTORS VOTE WITH THEIR FEET RATHER THAN SHARES. Another privatization scandal, this time with LyNOS

The reason is simple enough: the investment commitments are too big. According to bidding rules, an investor had to produce $100 million or 1 million tons of crude oil within ten months from the date of signing the purchase contract, on account of working capital growth, and redeem the company's domestic and foreign liabilities ($100 million and $67 million, respectively) over the next three years.

Experts of the Verkhovna Rada's Privatization Control Commission do not rule out the possibility that the bidding was aimed at a specific buyer, considering the size of the interest being offered, and that this bidder became disillusioned seeing today's soaring costs and the company's financial ills, plus the general atmosphere of instability on the elections' eve. The Russian company Lukoil is mentioned as the most likely investor now resolved to wait until the Ukrainian state pays at least some of LyNOS's debts.

Roman Shpek, Chairman of the National Agency of Ukraine for Development and Integration, met with Herr Bernd Glimann of the Westdeutsche Landesbank last Tuesday and handed him a document confirming the government's guarantees to service and repay the bank's loan (70 million ECU at 9.21% annual interest, given the Lysychansk refinery in 1992 to finance construction of a polypropylene-manufacturing facility). The first payment (4.5 million ECU) on the outstanding debt, along with penalties, was made last October. The second one (5.125 million ECU) was made this February. The third payment (5.3 million) is scheduled for March 27, reports Interfax-Ukraine.

In short, the prospective buyer will have to wait another four years or so until the main foreign liabilities are paid off. Of course, domestic debt will have grown during the same period, and the company will have got much poorer, losing much of its starting price. Obviously, the plan is to wait until the State Property Fund sees no alternative but to revise the bidding rules, making them more acceptable and perhaps even preferential.