There is a lot of rumors about big petrochemical company called NizhnekamskNefeteHim (http://www.nknk.ru/about_company_en.asp) go bankrupt in a near future. Here are the facts:
1. Revenue for 2006 is almost $1.3 bln
2. More than 20,000 employees
3. History of bond issues:
Issuer Volume, mln USD Type Status Maturity
NKNH 1 12 Ru bond paid off 11.06.2002
NKNH 2 50 Ru bond paid off 05.24.2005
NKNH, 2015 LPN 200 Euro Bond Traded 12.22.2015
NKNH 3 70 Ru bond Traded 09.01.2007
NKNH 4 50 Ru bond Traded 03.26.2012
4. More than 75% of voting stock is Owned by TAIF (a.k.a Local Governor)
5. Canada based Mackenzie Financial Corporation represents 3.9% of votes.
Taif, which is controlled by an older son of the local governor, consolidated more than 75% stock in early 2005. The CEO of NKNH, Mr. Busigin, is a long-term director from the Soviet time. There were a number of indications of conflict of interests between owner and management’s teams. The last “straw” was Taif’s desire to “dilute” the minority shareholders. In 2006 Board of Directors of NKNH approved the issue of more voting stock in the amount more 1 bln USD. The fact is current capitalization of company is less than 900 mln USD. There were no any benefits from this action except that minority shareholder would have lost half of the asset in NKNH. This would have given the current owner an absolute control and a possibility to sell NKNH in a most “effective way”. Minority shareholder, as usual, would have been “screwed”.
The story had a lot of publicity and thorough investigation by Feds is on its way. Additional emission of stock is canceled but CEO is most likely will be gone. He is already offered a position as a Deputy Minister of Energy in Moscow.
What about bonds? They are going to be paid at time despite these corporate games.
For more info please contact Robert Gayanov at rgayanov@verizon.net
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9 comments:
Is it your opinion, then, that these shenanigans were exposed and then something was done about it....in other words the system is working?
Funny about what is going to happen to the CEO. Reminds me of corporate life in U.S. An executive really messes up and is promoted out of the situation.
What would you say are the lessons to be learned from this? What were the warning signs? I'm really interested in taking a checklist from this and seeing if it can be applied to other companies to weed out any that are not desirable. Is ownership that is split among dozens of major investors better than just one or two?
The system is getting better. Even 10 years ago, predetermined bankruptcy or diluting shareholders was rarely punished. Now Russian courts and authorities learned to recognize those crimes.
The system is getting better. Even 10 years ago, predetermined bankruptcy or diluting shareholders was rarely punished. Now Russian courts and authorities learned to recognize those crimes.
Ownership is a major driver in business. Very often, there is a conflict of interests between majority and minority shareholders. It's not easy to say where and when to buy company's bonds or stocks - when there is one major owner or few/many partners. The rule of thumb, however, is 1 owner - stable management - more predictable future.
I'm starting to see why you are so upbeat about bonds. No matter what happens to the stock price, be it from bad profits, industry risk, or dillution from management, as long as the company is a functioning entity the fixed income will be paid.
As some prominent US CEOs say: "A lot of debt never kills a company but unpredictable cash flow can"..
Is this common situation in Rissia?
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