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Hostile takeover of Cypriot company jeopardizes continuation of Black Sea Grain Corridor deal

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Η εχθρικor απκτ&eta ;ση Κυπριακorς εταιρεΙας βαζει σε &kappa ;λνδυνο τη συνΕχιση της συμφωνλα&sigmaf ; Διαδρόμου Σιτηρόν στη Μαψρη Θαλα&sigma ;σα

In July 2022, an agreement was reached between Russia, Ukraine, Turkey and the UN to allow the shipment of grain from some Ukrainian ports, including Odesa, in an effort to ease the growing global food crisis. This development was of particular importance to a Cyprus-based company, owner of one of the few remaining operational grain terminals in the port of Odessa, which supports one of the world's most important grain producers.

The Cypriot company was founded in Cyprus in 2003 by two well-known businessmen of Ukrainian origin. From then until today and until the recent hostile takeover attempt by one of its major creditors, a US-based hedge fund (“Fund”), in December 2022, it operated in Cyprus through its offices and staff here as well as in Ukraine and abroad. The Company had agreed to short-term financing from the Fund in 2019 for a total amount of US$75 million, before the pandemic and the Russian invasion of Ukraine in February 2022 crippled the ability to repay the loan.

In the midst of a pandemic and one of the Eastern EU's most horrific conflicts, Ukraine was still the world's seventh largest producer of wheat in 2021 and 2022. The grain market continues to be a major driver of growth in an economy under siege. In this economy, the Cypriot company, through its subsidiaries and Group companies in Ukraine, operates one of Ukraine's most modern and efficient grain export facilities at the largest and most advanced grain terminal on the Black Sea. The Group has converted a facility with an initial grain storage capacity of 90,000 metric tons (MT) into a facility that currently accommodates 200,000 MT.

Despite a continuous and presumably well-funded campaign of disinformation, fake news and inaccuracies by the Fund and its representatives in Cyprus, Ukraine and the UK, an interim order was secured in February 2023 from the Cypriot Courts blocking the sale of the terminal station and ensures that the dispute between the two parties will be referred to arbitration which is the form of dispute resolution agreed by the parties.

The interim order in place has prevented, for the time being, the intended “fire sale” of the terminal, believed to have been orchestrated by the Fund, long before the takeover attempt. Just as the Cyprus Company was regaining its ability to repay its loans, restructure and thrive as a protagonist of Ukrainian private sector resilience in November 2022, a representative of the Fund reportedly held secret meetings in Vienna with both Ukrainian businessmen and politicians about the exposure of their loans to Ukraine. This fact was revealed in the Ukrainian press soon after, in November 2022.

Despite the denials that this meeting was related to the “fire sale” of the Cypriot company, in December 2022, and without any prior notice, the Fund allegedly executed the guarantees in favor of the loan granted to the Cypriot company and bought the group unless the sum of more than US$98 million was repaid within hours. At that time, the Cyprus Company was in protracted discussions with various potential investors, resolving the issue of repayment of the Fund.

Intimidation tactics, threats against the usual peace and livelihood of the Group's employees, inaccurate and unjustified reports to the Ukrainian police are just some of the methods used by the Fund and its representatives in Cyprus and Ukraine, to take over the Terminal of the Group in Odessa, the value of which was estimated at US$400 million before the war – several million US dollars in addition to any amount due under the loan facility.

The UN Secretary-General Antonio Guterres visited Kiev earlier in March, reportedly in an effort to bolster an agreement that ensures grain exports from both Ukraine and Russia. The timing of his visit was judged by Ukrainian publications to be imperative. It is reported that there is already considerable concern that Russia may refuse to keep the agreement in place.

The interim decree currently in force in Cyprus is the only means of ensuring that the ownership dispute and the operation of the Terminal in Odessa, will be resolved transparently within a legally acceptable framework.

Source: www.kathimerini.com.cy

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