If successful, Mriya’s case might serve as an example of how skillful management can bring a company through technical default despite turmoil in Ukraine’s economy.
Ternopil-based Mriya Agro Holding is now on the path to repay its $1.1 billion in debts to foreign creditors after reaching an agreement with them. The agroholding is increasing land productivity, buying new equipment, and adopting technology solutions to recover.
However, the company remains at risk of raider attacks from its former owners, the Huta family, suspected of embezzlement of foreign loans.
Still in debt
Simon Cherniavsky, the CEO of Mriya, took over in February 2015, shortly after Mriya defaulted and its former owners fled the country.
Founded in 1992, Mriya went public on the Frankfurt Stock Exchange in 2008. In August 2014, the previous owners of the company that controls 177,000 hectares of land in western Ukraine, the Huta family, failed to repay creditors. The ex-owners left the company in technical default. They are suspected of allegedly transferring the money to offshore firms in Cyprus, which became known after the leak of the Panama Papers. An arrest warrent for Mykola Huta, the former CEO, has been issued by Interpol.
Since then, Cherniavsky’s new team, appointed by Mriya’s creditors and bondholders, have been trying to preserve the company, taking back land from the previous owners through the courts, restructuring and paying debts, and restoring the holding’s image.
As one of the signs of recovery, Mriya was accepted back to the American Chamber of Commerce in Ukraine in September.
“It’s a positive story that doesn’t have an ending,” Cherniavsky said. The company has to finish debt restructuring and return money to creditors, he said.
In May, Mriya agreed to restructure debts with the International Finance Corporation. They split the debt into secured and unsecured parts. Cherniavsky said the restructuring should be finished by May.
IFC regional manager Jason Pellmar confirmed that the IFC agreed on restructuring principles developed by Mriya and its creditors.
“The new company’s management has been focused on reviving the company and ensuring that it continues to operate,” Pellmar said in an email.
Technology solutions
When the ex-owners left the company almost in default, Mriya was deep in debt and lost some of its land and machinery.
Cherniavsky was shocked to see the conditions in 2015. “I remember being absolutely astonished with the degree of fraud that was going on,” he said.
To recover, the holding started purchasing new equipment to replace stolen items. The company said the Huta family took about 1,100 units of equipment. The company spent $25 million on new machinery and plans to meet the shortage by 2020, according to Mriya chief operating officer Andriy Hryhorov.
Apart from that, the company improved the controlling GPS system on machinery to minimize theft and optimize efficiency, Cherniavsky said. The trucks are equipped with the fuel sensors that monitors consumption and unsanctioned stops. On a field, the agronomists use tablets to get the data they need in farming.
The GPS system was introduced by the Huta family, although they did not use the data efficiently, Cherniavsky said.
“It was all completely superficial,” he added.
Still at risk
Concentrated on recovery, Mriya remains at risk of raiders attacks from the previous owners.
Alexander Paraschiy, head of research at Concorde Capital, said the threat puts the company’s recovery in danger. “Of course, its financials are getting better, its EBITDA (earnings before interest, tax, depreciation, and amortization) is increasing and so is its ability to cultivate more land,” Paraschiy said.
“But the key risk for its operations is a possible continuation of attacks from former shareholders who have good connections to power brokers in Ternopil regions, the core region of Mriya’s operation.”
In April, Mriya regained control over 10 companies with 5,000 hectares of land through the court from the previous owners. Cherniavsky expects to return several more hectares.
“But obviously the more time goes by, less likely those leases will still be valid,” he said.
According to the open register of private companies, Ivan Huta, a former owner, founded another agricultural company in
December 2015. The firm, based in Ternopil Oblast, specializes in crop production.
“I think it’s pathetic that he is allowed to continue to farm,” Cherniavsky said.
Kyiv Post couldn’t reach Ivan Huta for comment.
Future potential
After debt restructuring, the company might be ready for sale. Cherniavsky estimates Mriya’s assets at $150 million, with potential growth to $250-$350 million.
Paraschiy said it’s too early to discuss a potential sale as it won’t happen in the next five years.
As Mriya recovers and improves its image, Cherniavsky sees challenges ahead in finding foreign investment. He said that the absence of the rule of law and lack of privatization of state-owned enterprises prevent new investors from coming.
“Unfortunately, I think Ukraine is behind the curve in terms of getting results and achieving the milestones, even the KPI (key performance indicators) the president (Petro Poroshenko) put in front of himself one-two years ago,” he said.
