#SPFU’s Enterprises: Oriana JSC appeals the debt of 170 million euros and plans to return illegally alienated property

The State Property Fund in cooperation with Oriana JSC develop a legal position on appealing the debt that was imposed on the enterprise “technically” during the process of withdrawing property by companies with Russian capital.

Kalush enterprise Oriana has been under the bankruptcy procedure for already 20 years. The largest chemical enterprise in Ukraine, which in the early of 1990s produced more than 100 types of goods, constantly growing values, launched new products, and maintained 60% city’s housing stock, becamea hostage of fraudulent schemes.

In 2000, Lukor LLC was established on the basis of Oriana, to which most of the property of Oriana was transferred. The partner of Lukor LLC was a company with russian capital Lukoil-Naftokhim LLC (the Lukoil Ukraine group of companies was controlled by the russian oligarch Vagit Alekperov, who fell under the sanctions). One of the obligations of Lukoil-Naftokhim LLC, with which it agreed, was the repayment of Oriana’s debt. A loan for the construction of capacities for the production of polyethylene and polypropylene on the basis of the Chlorvinyl Production Association (of which Oriana became the successor) was taken in the early 1990s from the Bavarian United Bank under state guarantees.

However, Lukoil did not pay off debt, and subsequently transferred the assets of Lukor LCC to another, new legal entity - Karpatnaftokhim LLC (the beneficiary is also from the rf), after that the  state lost control over the enterprise. Therefore, the debt to the German side had to be paid by the state represented by the Ministry of Finance of Ukraine, and now Oriana is a technical debtor to the state.

In 2015, the criminal case against Lukoil was initiated under Article 191 of the Criminal Code – misappropriation of property. Since then, a number of legal proceedings have taken place on the illegality of the transfer of Oriana’s property to Lukor LLC. The debt case is currently pending before the Supreme Court. In line with the tough stance of the new SPFU team regarding assets with russian capital, the new management of Oriana (appointed in April this year) is preparing, together with the Fund, for a new round of litigations.

“The chances of recognition of previous decisions on the alienation of Oriana’s property as illegal are quite high. This applies not only to the story with Lukoil.  There is a similar precedent with Oriana-Eko LLC, in whose ownership the Dombrovskyi quarry was transferred. We will fight for the return of property because we see prospects in the restoration of the enterprise,” said the new Acting Director Ruslan Kucheriavyi.

Oriana-Eko LLC was established in 2016 as a part of the implementation of the rehabilitation plan of Oriana LCC. Oriana filled the authorized capital of Oriana-Eko with its assets (Dombrovskyi quarry and storages), and was the only member of the LLC until the spring of 2018 when the second founder appeared – Kalush Salt Company. And since June 2018, the Kalush City and District Court has been considering a criminal case regarding the legality of the transfer of the quarry and storage facilities to the authorized capital of Oriana-Eko LLC.While the quarry is not working and is in a flooded state, water arrives at it and salts are gradually carried out of it into the aquifers. This worries conservationists and city officials.

“Obtaining positive court decisions by Oriana and the gradual resumption of the operation of the enterprise should be another case of effective corporate management of state assets. For example, thanks to the resumption of potash mining at the Dombrovskyi quarry and the production of mineral fertilizers at Oriana, the possibility of which the Fund has already announced earlier, the enterprise will not only have a chance for a gradual resumption of economic activity, but will also solve important environmental issues in the region,” noted Oleksandr Fedoryshyn, Director of the State Corporate Rights Department of the SPFU.