Staff and wire reports – Ukraine’s Supreme Court struck down on April 8 a controversial debt for equity deal from last summer that yielded a $500 million plus stake in a leading Ukrainian electricity producer to a company controlled by Rinat Akhmetov, Ukraine’s top businessman.

In a victory for Prime Minister Yulia Tymoshenko, who pledged to reverse suspect privatizations, the court cancelled last year’s bankruptcy deal, which was sponsored by the government of former Prime Minister Viktor Yanukovych, who has close ties to Akhmetov.

The deal diluted the state’s 76 percent stake in energy generator Dniproenergo to a 50 percent plus one share, while giving a blocking interest to Akhmetov’s Donbass Fuel and Energy Company (DTEK), which agreed to settle debt and invest badly needed funds into the firm.

The deal cancelled by the court increased DTEK’s holding in Dniproenergo as a result of a share emission from 8.7 percent to 40 percent, at a price tag of about $208 million.

DTEK defended the transaction, saying it cleared large debts owed by Dniproenergo, pledging to invest heavily. Some analysts said the deal was unfair, arguing the market value of the shares received by DTEK were worth more than $500 million at the time.

Other minority shareholders complained their interest was diluted.

The lawsuits which led to the Dniproenergo deal’s reversal were sponsored by a company linked to Akhmetov business rival Privat Group.

Suspicion loomed Tymoshenko acted in tandem with the Privat Group to reverse the deal, but publicly she has clashed with Privat to restore government control over other companies.

Tymoshenko’s government is expected to welcome the court ruling as it upholds the government’s plans this year to privatize the state’s stake in Dniproenergo.

DTEK criticized the court ruling, saying it did not keep to the letter of the law and favored instead the interests of the magnate’s business rivals. DTEK officials said they could challenge the ruling in a foreign court.

In an April 8 report, Kyiv investment bank Concorde Capital said the ruling would not resolve the stand¬off.

“One key question remains uncertain: whether Dniproenergo’s financial recovery will be rolled back," the report said. "As part of its financial recovery plan, DTEK related coal mines contributed $200 million in cash ... already spent to offset Dniproenergo’s debt.”

The ruling helped minority shareholders, whose stakes won`t be diluted as a result, Concorde Capital said, though it will have a negative short term impact on Dniproenergo.

“The company will have to reenter its financial recovery process,” Concorde Capital reported.

Kyiv Post