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Ukraine’s vast network of natural gas pipelines feed Europe with a quarter of its supply needs, pumping Russian gas westward. Some of the pipelines stretch across Ukraine’s Carpathian Mountains www.naftogaz.com Russia bank may help Kyiv with $4 billion loan; Investors approve first big debt restructuring; Billionaire increases grip over leading TV channel; H+H suspends construction of Ukraine factory; MHP plans to boost land bank by 40 percent.

Russia bank may help Kyiv with $4 billion loan

(Reuters) - Ukraine’s state firm Naftogaz could secure up to $4 billion in financing with the help of Russian investment bank Troika to ensure payment for gas imports from Moscow, the Internet site Ukrainska Pravda reported.

A banking source later told Reuters that Troika is only large enough to serve as a conduit for the funds, which could ultimately come from Russian gas export monopoly Gazprom. Naftogaz, which must pay for gas imports by the seventh day of the month following purchases, offered no comment on the report, based on what the authoritative Internet news service said was a fax of a draft contract between the companies. “But Troika is definitely just a pass-through structure... Gazprom’s structures are the ones most likely to provide the financing,” an investment banking source said.

Under the deal published by Ukrainska Pravda, Troika would organize the necessary financing for Naftogaz by syndicating loans or by organizing bond issuance. The deal may be signed later this month, it said. Moscow has repeatedly warned that Europe could face new supply disruptions if Ukraine fails to find the money to pump Russian gas into storage to ensure smooth winter supplies. Ukraine has said it needs at least $4 billion in credits to buy Russian gas for storage and hopes to raise the funds through European banks.

Privately-owned Troika, one of the oldest and largest home-grown investment banks in the former Soviet Union, will get a commission on any financing it secures for the Ukrainian firm and will also have access to any the Naftogaz paperwork necessary for the deals. Two sources close to Troika and Ukrainian officials confirmed talks between the two companies without giving details, Russian business daily Vedomosti reported.


Investors approve first big debt restructuring

More than 90 percent of investors with interests in the $175 million Eurobond notes of leading Ukrainian real estate group XXI Century have agreed to a debt restructuring plan proposed by the cash-crunched company.

The deal, approved on July 7, marks the first big debt restructuring deal by a Ukrainian company during this year’s economic crisis. It is also expected to provide momentum to debt talks between Ukrainian companies and their lenders, said investment bank Renaissance Capital, which acted as XXI’s advisor.

With the Ukrainian economy squeezed by recession, many companies are struggling to service debt obligations. Experts estimate that billions of dollars of Ukrainian corporate debt will need to be restructured this year if companies are to avoid default on their debt obligations.

XXI Century, a company watched closely by investors by virtue of being listed on the London Stock Exchange, was founded and is managed by Ukrainian real estate tycoon Lev Partskhaladze. Like many Ukrainian companies, it borrowed heavily in past years, reinvesting money raised into Ukraine.

Its investments were seen as strong, but deep vulnerabilities were revealed when Ukraine’s real estate bubble was burst open by the global financial crisis and recession, sending the property market into a deep freeze. Investment bank Galt & Taggart said that XXI Century’s debt restructuring plan envisions that the Eurobond notes with initial maturity in 2010 and a put option on May 24 this year, will be redeemed in five tranches on every November 24 over 2010-2014.

Other restructuring talks closely watched by investors include Eurobonds placed by Alfa Bank Ukraine, the debts of troubled Ukrainian bank Nadra and First Ukrainian International Bank, itself owned by Ukraine’s richest billionaire, Rinat Akhmetov. Akhmetov’s bank this week agreed to immediately pay off debt obligations owed to Cargill Financial Services, which threatened the group with lawsuits, but insists other lenders are more cooperative in debt restructuring talks.


Billionaire increases grip over leading TV channel

Ukrainian billionaire Igor Kolomoisky has agreed to provide a $100 million cash injection into the Ukrainian operations of Central European Media Enterprises (CME), Reuters said in a July 3 report. Kolomoisky also agreed to merge his and media group CME’s TV channels in the ex-Soviet country, TET TV and Studio 1+1, Reuters reported citing a CME statement.

In exchange, Kolomoisky, a CME minority shareholder and a member of its board, will get a 49 percent stake in its Ukrainian business. Kolomoisky has also granted CME a put option to sell its 51 percent stake to him for $300 million. The put option can be exercised within a year of completion of the transaction, according to Reuters.

Some media watchdogs have expressed concern that Kolomoisky could use his increased control over television media in Ukraine as leverage for personal gains, offering support to politicians eyeing the presidential seat in an election to be held in January 2012. CME, however, expressed its support for the influential Kolomoisky.

Adrian Sarbu, President and COO of CME, said: “I am very pleased with our extended partnership with Igor Kolomoisky which will enable us to continue developing our operations in Ukraine and will add further to our liquidity. I’ve been working with Igor since 2007 and I have great respect for his in-depth knowledge of Ukraine. This investment confirms our view that Ukraine will be a powerful growth engine for CME in the future.”

CME, a Bermuda-registered group founded by US billionaire Ronald S. Lauder, operates in seven central and eastern European countries including the Czech Republic and Romania. Reuters said it has been hit by lower advertising spending in the economic downturn. CME reported a 37 percent drop in first-quarter revenue and warned ad spending would continue to decline this year. Last month, Time Warner completed a $241.5 million investment in CME, giving the U.S. group a 31 percent stake.


H+H suspends construction of Ukraine factory

Denmark’s H+H International has suspended construction of a porous concrete plant worth 32 million euros in Ostroh district of Rivne region due to problems in obtaining permits for sand extraction, a key raw material used in the production porous concrete, Interfax-Ukraine reported.

The group said it would resume construction as soon as all permits are received. But it remains unclear if the plant will be built on schedule by the third quarter of this year. When completed, the plant will have a production capacity capable of production more than 400,000 cubic meters of porous concrete units per year. It will encompass a territory of 18 hectares.

H+H traces its roots back to 1909. The group currently owns production facilities across Europe into Russia.


MHP plans to boost land bank by 40 percent

London Stock Exchange listed MHP, Ukraine’s largest chicken meat producer, plans to increase its land bank, buying up and acquiring more Ukrainian agriculture land via lease agreements, to 250,000 hectares by 2011 from a current 180,000 hectares, the company’s CEO Yuriy Kosiuk said in an interview with Vlast Deneg magazine. Kosiuk is a majority shareholder. Ihor Tarasyuk, a close confidant of President Victor Yushchenko, is reported to also have an interest in the group.

The announcement signals strong expansion plans by MHP, already one of Ukraine’s largest agriculture and meat groups, and continued strong interest in Ukrainian agriculture land, renown worldwide as the world’s richest soil. In addition to producing chicken, MHP cultivates agricultural land to produce corn, wheat, soybeans, rapeseed and sunflower seeds, investment bank Dragon Capital said in an July 6 note to investors.

The group uses corn and sunflower seeds for in-house production of chicken fodder, being currently fully self-sufficient in corn but only 15 percent self-sufficient in sunflower seeds. Dragon expects MHP to muster $120-130 million in revenues from exports this year.