The State Property Fund of Ukraine implements the financial rescue of Zaporozhye Titanium & Magnesium Combine, LLC
Zaporozhye Titanium & Magnesium Combine, LLC (hereinafter ZTMC) is included in the list of objects to be privatized. Appropriate order of the Cabinet Ministers of Ukraine came into force on November, 25.
In explanatory note to the document is said that inclusion ZTMC in the list of objects to be privatized will allow the enterprise to stop all enforcement proceedings and ensure further stable work. A draft of the appropriate resolution is prepared in fulfilment of the enterprise financial recovery plan developed by the Fund and ZTMC. First of all, this draft is directed to activate the rule of clause 12 of article 34 of the Law of Ukraine “On Еnforcement Proceedings”, that stops committing of all enforcement actions, concerning state enterprises or business enterprises’ blocks of shares during their inclusion in the list of small-scale and large scale privatization. This makes it possible to open a new checking account for implementation of production activity and the enterprise modernization.
Consequently, ZTMC will have opportunity to carry out production modernization, which significantly reduce the product cost. Thus, from April 2021, the enterprise will increase output of finished products by 50% and that will completely lead enterprise to break-even. After long years of negligent management, this production update will become the first important step on the way to financial recovery.
Furthermore, inclusion ZTMC to the list of the objects to be privatized will protect the enterprise from possibility of bankruptcy proceedings beginning.
The critical necessity to implement an anti-crisis plan of the enterprise financial rescue appeared due to debts, accumulated during 11 years by past management headed by former director Volodymyr Syvak, for electricity in the amount of more than UAH 1.2 billion, which led to the arrest by the court of all accounts of ZTMC.
Within the framework of the mentioned plan implementation, on November 23, 2020, the State Property Fund of Ukraine registered a new edition of the statute of ZTMC, which canceled the priority right of the second shareholder to buyback in case of privatization – thus the state share in case of privatization will be realized exclusively via a transparent competitive basis.
The decision to hold an e-auction on privatization will be considered only after the end of the judicial process of the Specialized Anti-Corruption Prosecutor’s Office and and the National Anti-corruption Bureau of Ukraine on return of 49% of Tolexis to the state.
Reference: ZTMC was founded on the basis of SE "Zaporozhye TMC", the only manufacturer of sponge titanium in Ukraine and Europe.
Share of the State: 51% of shares, the state corporate governance is carried out by the State Property Fund of Ukraine.
TOLEXIS TRADING LIMITED share: 49% of shares. The private shareholder received this block of shares in exchange for investment commitments in amount of $110 million. These funds had to be spent to make ZTMC the most modern titanium production in the world. However, the modernization was not performed, and the company is in a much worse condition than before attracting this investor. In particular, instead of production capacities in the amount of 900 tons of titanium sponge per month, now the company can produce only 420 tons, which is extremely negatively reflected in economic indicators, because economies of scale are not achieved.
Law enforcement agencies suspect the previous management of misappropriation of UAH 492 million, during which the company practiced schemes of selling products to affiliated companies at low prices.