Arthur Zurabyan, of ART DE LEX, commented on the UTair decision to refuse the redemption of shares
he shareholders of UTair demanded that the company buy back their shares, after the approval of a major deal at a shareholders’ meeting. Nevertheless, the company will not buy back shares because of the company’s negative net asset value, according to a report UTair published on its website on Thursday. From the report, it is unclear how many shares are involved and how big the transaction would be. A representative of UTair refused to comment.
The last meeting of the UTair shareholders took place on 10 April. It was an extraordinary meeting since the shareholders had to approve a debt restructuring scheme that, at the end of March, amounted to roughly RUB 75 billion. The shareholders approved a seven-year syndicated loan of not more than RUB 29.5 billion from a consortium of banks–Sberbank, Russia Bank, Khanty-Mansiysk Bank Okrite, Credit Bank of Moscow, Unicredit Bank Alfa Bank, and others. An alternative option under consideration was a 12-year loan of RUB 27 billion. In addition, the shareholders approved a seven-year loan of RUB 18.6 billion from Sberbank. Interest-bearing nonconvertible bonds can be issued to replace the syndicated loan. In addition, the meeting approved refinancing the previously issued promissory notes of RUB 7 billion in favor of Surgutneftegaz.
According to the information from UTair, owners of 95.35 percent of the shares voted in favor of those decisions, 0.01% were opposed, and about the same percentage abstained, even though they participated in the meeting. According to the stock quotation on Thursday, 0.02 percent of the shares cost only RUB 1.5 million. If a shareholder is entitled to participate in the meeting but voted against a decision on a major transaction or abstains from voting, that shareholder has the right to demand the redemption of his or her shares, according to Arthur Zurabyan, of ART DE LEX. Denis Frolov, a senior lawyer at the BMS Law Firm, said that the company determines the redemption price. “If the company refuses to pay, shareholders may demand redemption in court. The law does not protect the company, and the court is likely to decide in favor of the shareholders. If the court will compel the company to buy back shares, it will determine the redemption price and may take into account the negative value of net assets," added Frolov. The index of the net asset value is calculated from the balance, based on the open method of the Ministry of Finance, and it usually is close to the "capital and reserves" index, as Alexey Rozhkov, an analyst of IFC Metropol, explained. On 31 March, the UTair capital and reserves amounted to a negative figure of RUB 20.859 billion, while at the end of 2014, it was minus RUB19.404 billion. Rozhkov said that this indicator is important in the process of obtaining new loans and the restructuring of existing loans.
