The first meeting of creditors of Tomet LLC, which is a joint defendant in a criminal case over large-scale fraud and damages caused to PJSC Togliattiazot and JSC Uralchem, took place. Anatoly Selishchev, who was elected as the bankruptcy commissioner at the meeting, and is currently acting as the temporary manager of the company, told RAPSI about the most important results of this event, as well as about its future prospects.
At the end of November 2020, the Commercial Court of the Samara Region introduced a monitoring procedure at Tomet. According to the court’s decision, temporary manager Anatoly Selishchev was to conduct an internal audit at Tomet enterprise by March 1, 2021 and prepare a report on its financial standing. The data are to be submitted to the court, which, on the basis thereof, will decide on the introduction of one of the following procedure: financial recovery, external management, bankruptcy proceedings.
The first meeting of Tomet LLC creditors was held on February 18 in the city of Togliatti (Samara Region). According to Anatoly Selishchev, the meeting was attended by representatives of Tomet LLC, JSC Uralchem, Triumph Development Limited (Hong Kong based offshore company which owns Tomet), and the labor collective of Tomet.
The meeting approved Selishchev's report on the financial standing of Tomet, as well as the decision to declare the debtor bankrupt and to launch bankruptcy proceedings. Also, the meeting participants unanimously rejected the draft settlement agreement proposed by Triumph Development Limited, which provides for the write-off of 69.2 billion rubles ($940 million at the current exchange rate) of debt and a seven-year installment plan as to the payment of the remaining 18.46 billion rubles (about $251 million).
The creditors believe that the terms of the settlement agreement, firstly, do not answer the interests of both PJSC Togliattiazot and JSC Uralchem, and, secondly, they are a priori impracticable - Tomet will not be able to enforce the agreement as it lacks own assets for this purpose. Selishchev noted that at the moment Uralchem is the only creditor: "They have 100% in the register of creditors' claims."
The origin of debt
The obligations of Tomet to Uralchem in the amount of 87.7 billion rubles ($1.2 billion) arose after the verdict of the Komsomolsk District Court of the city of Togliatti in July 2019 that convicted the beneficiaries of PJSC Togliattiazot Vladimir and Sergey Makhlais and their foreign partners in the fraud case related to the TOAZ export operations in 2008 through 2011 (Article 159.4 of the Criminal Code of the Russian Federation).
Of this amount, more than 77.3 billion rubles (about $1 billion) are to be paid as compensation for the damages suffered by PJSC Togliattiazot and 10.3 billion rubles ($140 million) are due to Uralchem; it is to be noted that Uralchem was appointed as the damage collector in favor of Togliattiazot.
According to the court's decision, Tomet, owned by offshore company Triumph Development Limited, was found to be one of the defendants. The offshore company is controlled by Swiss businessman Andreas Zivy, convicted in a criminal fraud case.
Selishchev noted that Tomet's debts to Togliattikhimbank and RTS Bank amount to about 1 billion rubles ($13.5 million). “These are affiliated banks (both controlled by the Makhlais family), there is a suspicion that they have artificially created this debt. So far, they were not excluded from the register of creditors,” the temporary manager of the enterprise said.
Selishchev described the current financial standing of Tomet in extremely pessimistic terms: "at the moment, the rate of profit is steadily decreasing, re-equipment is not being carried out, the enterprise is slowly sinking." In addition, due to the poor technical condition as a result of accidents reported by Rostekhnadzor on December 6 and 13, 2020, one of the methanol units was put out of action and needs serious repairs.
Bankruptcy prospects
Earlier, the owners of PJSC Togliattiazot tried to bankrupt Tomet by turning to court, but were defeated in the Samara Regional Commercial Court and in the Eleventh Commercial Court of Appeals.
Later, Uralchem had to join the Tomet bankruptcy lawsuit, since exactly this enterprise was appointed by the Komsomolsk District Court of the city of Togliatti as a claimant for damages in favor of PJSC Togliattiazot in the fraud case, while TOAZ representatives in the court denied that it suffered any damages and renounced its status of a victim in court.
Thus, both instances recognized that Togliattiazot was not a legitimate claimant, and its claim was dismissed. According to experts, if the bankruptcy procedure at Tomet was carried out according to the scenario offered by the owners of Togliattiazot, the prospects for recovery of the damages would be zero, and the fate of Tomet's assets would be uncertain, perhaps those would have been withdrawn and sold to some affiliated company of the Makhlais.
The temporary manager confirmed that his report proved that it would be impossible for Tomet to restore solvency in its current financial standing. In this regard, it is assumed that a bankruptcy procedure will be introduced at the enterprise. “The term of the bankruptcy proceedings is six months, within that time, according to the law, the bankruptcy commissioner is to organize and hold the auction. At this auction, the property is to be sold to the person who offers the highest price,” Selishchev said.
In the event that "if the court appoints me as a bankruptcy commissioner, then I will be obliged to take an inventory of the property, then make an assessment and put it up for the auction." "At the same time, I will have to ensure the safety of this property until it is sold,” he noted.
Bankruptcy proceedings may be introduced at the enterprise by the Commercial Court of the Samara Region, the respective hearings are scheduled for March 1. The court will be presented with a report of the temporary manager on the financial standing of Tomet.
Anatoly Selishchev specifically notes that the introduction of bankruptcy proceedings in no way means the liquidation of Tomet or will result in any problems for its employees. "The company will continue its stable work, and my task as a bankruptcy commissioner is to organize this work and preserve its labor collective."
The future of the labor collective
Selishchev stressed that the employer would be obliged, according to the Labor Code of the Russian Federation, to ensure timely and full payment of wages to Tomet employees both during the bankruptcy proceedings and after the enterprise is put up for the auction.
“All obligations to the labor collective will be fulfilled unambiguously. Their rights will not be infringed upon. And nothing can influence this, because Tomet assets are sufficient enough to meet the costs of the bankruptcy procedure, including the payment of salaries. If I am to be the bankruptcy commissioner, I will be obliged to monitor the fulfillment of all these obligations," Selishchev says.
The enterprise will continue to work all this time, and after the transfer of the asset to the new owner is completed, the labor collective is to be preserved.
Restoring the company's solvency
The expert believes that such a method of restoring solvency as replacement of assets, which provides for the transfer of the property complex and its labor collective to a new legal entity, can be applied to Tomet.
“This method is quite possible, since it is provided for by Federal Law “On Insolvency (Bankruptcy).” If creditors agree to this, it means that a new company will be created, which will begin to sell the stocks or its share instead of assets at auctions," Selishchev explained.
He clarified that it is not possible to restore solvency, since the amount of Tomet's assets is 10 billion rubles ($136 million), whereas the amount of its liabilities makes 87 billion rubles ($1.2 billion).
“In my opinion, it is preferable to pay off as many of the creditors' claims as possible. But first it is needed to deal with the situation at the plant, and only then make some conclusions about what is better or worse. We will use any method stipulated by law,” Selishchev concluded.
The temporary manager does not see any special risks that could arise during the implementation of the bankruptcy proceedings and the events arising from these proceedings. The only factor to take into consideration is that Tomet is supplied with all energy resources by Togliattiazot. Therefore, only TOAZ's opposition can provoke risks. “However, again from the point of view of salaries and the preservation of the property complex, there should be no risks,” Selishchev believes.
That is, such developments will not affect the payment of wage arrears to the employees. “Workers will not be affected at all under this procedure. They will definitely receive all salaries. I am practically sure that all jobs will be 100% preserved, especially with regard to the workers, they will definitely not suffer,” the temporary manager assured.
Prospects for bankruptcy proceedings
The question of the bankruptcy commissioner, Selishchev reminded, should be decided at the first court hearings on March 1. After that, according to him, it is possible that there will be changes in the composition of creditors, “since so far the only creditor that has established its requirements is Uralchem. In addition, several other creditors have presented themselves; those are also to be identified."
These developments will take place after the court hearings on the establishment of the requirements are completed. Selishchev does not undertake to estimate the time frame: "They can be carried out quickly, or all this can take six months or a year." The number of creditors, of course, will increase, the temporary manager adds, “but the entire amount already requested is scanty compared to that owned by Uralchem.
What can the introduction of bankruptcy proceedings bring to Tomet? “Firstly, certain streamlining of the debt collection process. All obligations will be deemed to have been triggered, and no one will be able to collect debts in a way other than through bankruptcy procedures, what will ensure the stable operation of the plant. Secondly, as a result of the bankruptcy proceedings, a more efficient owner or investor may come to Tomet, who will invest in this enterprise and develop it," Selishchev explained.
Thus, the introduction of bankruptcy proceedings at Tomet, a change in the management and, ultimately, the arrival of a new qualified investor will allow to financially rehabilitate the company, put its equipment in order, and establish efficient production activities, as well as to ensure the work of the labor collective with timely and full payment of wages.