Email This Post - Print This Post Print This Post

By John Helmer, Moscow

It has been obvious for some time that Vladimir Kekhman’s banana financials were so rotten, his Joint Fruit Company (JFC) was republishing its second-quarter financial results as if they were the third quarter figures, postponing the fourth quarter and full-year releases, and refusing response to the question Why?

It has also been obvious that Kekhman has been trying not to pay a mounting bill from the UK High Court in London. There since last August, Star Reefers, the owner of the three freighters JFC chartered to carry banana cargoes from JFC’s Ecuadorian plantations to St. Petersburg, has won a compensation award of $16.3 million; additional costs and penalties; and judicial orders against Kekhman personally, along with his appointees at JFC, to disclose where they have put their money, and to freeze JFC transactions with funds the court has required to be paid to Star. Other litigation to seize JFC’s containers in the US, as well as threaten seizure of its banana boxes as they move on Maersk freighters, is also pursuing the fleet-footed Kekhman.

And finally, just as obviously, Kekhman has been gulling the London and New York media into believing that while his business collapses, he’s full of cash to spend on the Mikailovsky Theatre’s ballet tours to the two cities later this year. Kekhman is the chief executive of the theatre. Here’s the full story until yesterday.

Today’s news is that after announcing on December 23 his readiness to negotiate a settlement of his debts to Star, Kekhman has now despatched his lawyers into court at St. Petersburg to declare JFC bankrupt.

It looks like curtains for Kekhman’s transformation from provincial banana merchant to international ballet impresario, not to mention for the move to the Mikhailovsky of the Bolshoi’s lead dancers, Osipova and Vasiliev. Curtains too for the Russian banana trade’s biggest star.

 

But wait! — the curtain has come down on the show, but what’s that sign the lawyer is holding up for Kekhman?

According to court files for February 20 and 21, JFC has filed an application in its home town arbitrazh court in St. Petersburg, declaring itself insolvent, and applying for protection from its creditors.

Last November JFC’s Russian financial papers recorded that its long-term debt on December 31, 2010, was Rb6.9 billion ($222 million); its short-term debt, $203 million. By June 30, 2011, a refinancing had increased the company’s long-term debt to the equivalent of $235 million; but cut the short-term debt to $160 million.

Today’s Moscow newspaper reports suggest that Kekhman is going belly up by about Rb12 billion ($400 million), of which Rb5 billion ($167 million) is owed to Sberbank, the state savings bank, and Rb4 billion ($133 million) to Raiffeisen Bank (Austria). At least another $130 million in dollars and rouble equivalent are reported to be outstanding debt to international banks. These include Nordea (Denmark), Societe Generale (France), Unicredit (Italy) and Amsterdam Trade Bank.

JFC’s spokesman Andrei Semyonov said the company is not releasing financial data for the third and fourth quarters of 2011 or the full year. He added the company will not comment on whether the bankruptcy is connected with the High Court decision in London.

A press release issued by JFC claims the bankruptcy is “necessary to protect the interests of the creditors of the company and continue operating activities.” It also blames last year’s political troubles in Egypt, revolution in Tunisia, and civil war in Libya for the collapse of the part of JFC’s business selling bananas to Arab consumers. According to JFC it commands a 40% share of the Russian market, and sells “up to 30%” of its banana harvest to the Arab world.

When the Arabs stopped eating Kekhman’s bananas, he claims he moved the unsold fruit to Russia, where the surfeit has triggered a price decline. According to Fruit-Inform, a Ukrainian food industry analytical service, “in summer and autumn, Russia’s banana import volumes increased by 30% year-on-year. A trend of the price growth was outlined only in early December. However, as of today, banana prices on Moscow wholesale markets are half as high as in 2010 with supply still prevailing over real demand.” A Russian fruit market source is reporting that current banana prices in Moscow are about one-third below their level a year ago.

Kekhman’s subordinate at JFC, Andrei Afanasiev, is cited in the latest company release as claiming “the [company’s] lenders understand the cause of financial difficulties, recognize their temporary nature, are willing to compromise on issues of service and return of credit debt.”

“2011 was tough for our company. As a result of the losses the company now has a number of temporary signs of insolvency, and our appeal to the court is dictated by the requirements of Russian legislation, the desire to continue current operations, as well as the desire to protect the common interests of creditors…The company has sufficient resources to continue and plans to remain a leader in the Russian market.”
http://www.jfc.ru/press_sluzhba/news_main/press_reliz/

Industry sources say they don’t believe JFC’s banana sales to Egypt, Tunisia and Libya were significant enough in the company’s revenue total before last year’s troubles to leave the hole and cause the losses JFC is now claiming. The sources also interpret what Kekhman is doing as unforced by his bank lenders, either domestic or international. They point to evidence in St. Petersburg that companies in Kekhman’s group have been selling expensive real estate, including the Rechnaya Hotel, the Aeroplaza business centre,, the Frunzensky department store, and other assets over the past year; these transactions have generated proceeds of more than $180 million, the sources claim.

Sources in the Russian fruit trade believe there are other reasons for the JFC court action. According to one, “since the autumn everyone was saying that they will become bankrupt, but the company said that it’s just the yellow press, and that everything is fine.” Fruit traders report that banana prices are expected to recover strongly this year in the Russian market.

It has been speculated in St.Petersburg that Kekhman had been investing heavily in the St.Petersburg property market before the bubble burst in 2008, and that he emptied JFC of cash and leveraged his trading businesses in order to finance this speculation. After the recent sell-off, however, there is no telling where the money has gone. Right now, industry sources believe, Kekhman has decided to restructure the Russian JFC shell on his own terms, using whatever favours he can extract from the St. Petersburg court to ward off the payment pressure from the international courts.

JFC has acknowledged that it would like to negotiate an out of court settlement with Star in London; but Star is refusing to comment.

The targets of the UK High Court orders have included Kekhman himself, and not simply the JFC group companies, anticipating that Kekhman might attempt to put part of the banana business in Russia into bankruptcy, and continue doing business through his offshore companies.

In mid-December, a reporter for the London Guardian was invited backstage to cocktails with Kekhman when he staged a new production of Tchaikovsky’s Sleeping Beauty. The cocktails didn’t do the trick. “Gone were the jewel-like divertissements, the subtle layers of allegory, the sophisticated use of leitmotif, all replaced by bland pastiche,” the newspaper reported, implying that Kekhman’s raid on the Bolshoi, his cash, and the new Sleeping Beauty were “unlikely to be the production with which the Mikhailovsky will conquer New York.”

If Star applies to the New York courts to enforce its awards against JFC, Kekhman and his dancers are unlikely to get there.

The Mikhailovsky Theatre said its spokesman is not available at present to comment on the theatre’s financial position. At the Bolshoi Theatre in Moscow there was no reaction beyond confirming that Osipova and Vasiliev haven’t danced there since the autumn.

Leave a Reply