Tractor Plants may become bankrupt

VEB may well refuse to save the debtor.
VEB management acknowledged the failure of the debt restructuring plan for the troubled Concern "Tractor Plants" by Mikhail Bolotin and Albert Bakov. At the next meeting of its supervisory board, the state corporation will raise the issue of the bankruptcy of the concern. The reason for the failure sources of Kommersant are, in particular, the unsettledness of intra-group debt and the refusal of owners to convert part of the debt into the capital of KTZ. As a result, the concern's enterprises continue to accumulate losses, while the financial debt of KTZ exceeds 85 billion rubles.

VEB intends to consider the question of the bankruptcy of the Tractor Plants Concern (KTZ) at a nearby meeting of the supervisory board of the state corporation (it is headed by Prime Minister Dmitry Medvedev), a source familiar with the situation told Kommersant. According to him, from the restructuring plan of KTZ, adopted in December 2016, in fact, only VEB's duties have been fulfilled. So, at the expense of the state corporation, the debt to the personnel of the concern on wages was repaid by 680 million rubles. The accounts payable of the civil division of KTZ to tax collectors and landlords (3.2 billion rubles). In addition, VEB granted the civil division a loan of 1.9 billion rubles. to restore operating activities.

Under the restructuring plan, VEB as the largest creditor of KTZ received a military division and transferred it to the management of Rostekh. The co-owners of KTZ Mikhail Bolotin and Albert Bakov gained control over KTZ's civil assets, but the restructuring process was to be controlled by Vnesheconombank. The key goal was to preserve the main production assets of both divisions. Misters Bolotin and Bakov founded LLC "Machine-building and industrial group KTZ", where the enterprises of the civilian division departed (VEB owns no more than 50%). At the end of 2016, Mikhail Bolotin told Kommersant that he was "pleased" with the restructuring scheme, and noted that its implementation would take about three to five months. The current financial debt of the KTZ is 85.4 billion rubles., Says a Kommersant source, of which the debt to VEB is 58.5 billion rubles.

Promtractor produced 55 units of equipment for the first half of the year, the production of spare parts at Cheboksary Assembly Plant - 1.4 billion rubles. But KTZ enterprises remain unprofitable, third parties introduce bankruptcy procedures in their respect. At the same time, the active state support to the agricultural machinery industry as a whole (compensation of discounts of 15-20% of the price of machinery, for which 15.7 billion rubles is allocated in 2017) is provided by the KTZ, due to which other producers increase production. KTZ management, meanwhile, is knocking out new financing, threatening social instability, the interlocutor of Kommersant notes (7,900 people are employed at the plants).

Until now, the intragroup debt of KTZ has not been settled, the management allowed an extra-plan increase in inventories to 150 million rubles, and new advances exceeded the repayment of overdue accounts payable by 350 million rubles. Loss on EBITDA for half a year - 100 million rubles.

Proceeding from this, according to the source of Kommersant, VEB considered the implementation of the plan for the stabilization of the civil division impossible. Another interlocutor of Kommersant, who is familiar with the situation, assesses the state of agricultural machinery in the KTZ as "bad." He also believes that in case of bankruptcy, hardly anyone will be very interested in these assets.

Now, according to a source from Kommersant, VEB estimates the need for additional financing of the civil division at no less than 7 billion rubles, while the market value of half the civilian division and the entire military is estimated at 14.9 billion rubles. The beneficiaries did not agree with VEB's terms for converting part of the debt into KTZ capital, which is why the goals of the plan have not been met. As the interlocutor of Kommersant notes, it is also likely that the military division will not survive, as, according to Rostekh, its sanation is possible only through bankruptcy. In Rostekh, the division's bankruptcy was not commented, noting that the assets have significant competencies, there are products that are in demand in the framework of the GOZ. Another source of Kommersant, close to the division, characterizes the situation at the enterprises as "unpromising for today" and says that bankruptcy is seen as the only opportunity to "restart the processes". He also did not exclude the possibility of disrupting the GOZ.

VEB and KTZ did not comment on the situation, Mr. Bolotin also declined to comment. When Vnesheconombank's supervisory board approves management proposals, the monitoring procedure at key enterprises of KTZ can be introduced already by the end of the year, Kommersant's source believes, and bankruptcy proceedings can be opened by mid-2018. VEB also plans to bankrupt the Netherlands Machinery & Industrial Group N.V. and the masters of Bolotin and Bakov themselves.