The business disputes between the AIS group of companies and its creditors have turned into a loud public confrontation. The automobile holding company has said that pressure is being exerted on it with the aim of seizing its assets by force. The automobile holding company assigns the role of the raider in this confrontation to the DCH holding’s founder Oleksandr Yaroslavskyi. "Oleksandr Yaroslavskyi’s business entity, DCH, is conducting a corporate raid aimed at gaining control of the AIS group of companies, which is the largest automobile holding in Ukraine. Over the past few days, pressure has been exerted on the AIS group of companies, its shareholders, and members of their families by unidentified people with the aim of gaining illegal control of the assets of the group of companies. Various schemes are being used to block the operations of the companies in Ukraine and abroad. The alleged reason for the attack is the stalled negotiations with creditors," AIS said in a press release.

In addition, AIS has found an ally in the All-Ukrainian Association of Automobile Importers and Dealers (VAAID), which has said that it will support AIS in "protecting its legitimate rights and interests against encroachments by raiders."

What DCH Wants Yaroslavskyi’s reply was not long in coming. DCH immediately described the statement by AIS as slanderous and said that it would go to court to defend its honor and dignity. DCH group considers the claim of raider attacks as an attempt by an unscrupulous borrower to avoid fulfilling its responsibility to its creditor.

"The initiators of this information campaign are deliberately trying to mislead the public in order to avoid their responsibility to their creditors (particularly UkrSibbank) and law enforcement agencies regarding repayment of loans that were obtained but not returned in time. The DCH group has credible information confirming this because it has, historically participated in UkrSibbank’s work involving the debts of unscrupulous borrowers at the initiative of the bank,” DCH said in a statement.

None of the parties to the conflict provided details, but AIS recognizes that it owes debt to financial institutions. In particular, according to the automobile holding, the financial crisis of 2008-2009 resulted in a fall of more than 70% in its sales volume. The depreciation of the national currency and a host of other problems also aggravated the situation. As a result, it was unable to repay its loans on time.

This led to scandalous confrontations with some banks. However, according to AIS, the group has managed to reach agreements on debt restructuring with the majority of its creditors. "Agreements on debt restructuring have been reached with a number of foreign and Ukrainian banks - Alpha Bank, Swedbank, Raiffeisen Bank Aval, Megabank, and Credit Europe Bank,” the press release states. At the same time, the company’s share of the Ukrainian automobile market increased from 7% to 12.5% and its annual turnover increased from USD 250 million to USD 580 million from 2009 to 2013.

War with creditors AIS has been fighting loan wars since 2009. The same Alfa Bank with which AIS claims it has managed to reach an agreement has taken ownership of two plots of land with a total area of 16.9 hectares in Alushta (Crimea) belonging to the Kremenchug automobile assembly plant (KrASZ) as a result of litigation over debts. The bank opened a credit line of USD 30 million for KrASZ in 2008, with family members of the AIS group of companies’ co-founder Dmytro Sviatash acting as guarantors. However, according to information from the financial institution, it did not receive any payments on this loan.

The AIS group of companies’ share of the Ukrainian automobile market increased from 7% to 12.5% and its annual turnover from USD 250 million to USD 580 million from 2009 to 2013

In 2012, the conflict between the creditors and the borrowers reached Prime Minister Mykola Azarov, who received a letter from Alfa Bank, VTB Bank, and UkrSibbank. The letter stated that the automobile holding owed them more than USD 250 million and that they would not be able to recover this money without the help of the head of government.

In September this year, the Kyiv Economic Court seized the properties of a number of companies belonging to the AIS group of companies (Ukrbiznes LTD and Legalpeys LLC), which own about 20 properties (automobile dealerships and non-residential premises located in Kiev, Donetsk, Kharkov, Zhitomir, Lugansk, Cherkassy, Chernigov, and Rovno).

In short, AIS’ relationship with banks is not the best, and it is possible that the reason for the escalation of the conflict now was a ruling that the Kharkov Economic Court issued on October 21. This ruling has a rather interesting backstory. Since 2011, UkrSibbank has been trying to recover from AIS’ companies a debt of UAH 672.760 million that was provided as part of a multi-currency line of credit. However, the process was suspended in late July 2012 pending consideration of a bankruptcy case involving Avto Holding LLC, which is part of the AIS group of companies.

The court decided in 2013 that there were no further grounds to continue the suspension of the proceedings in the debt-recovery case. "Therefore, the proceedings in the case are subject to resumption and consideration in court," the court ruling states. Perhaps this ruling was specifically what prompted the bank to go on the offensive and the automobile holding to take a defensive stance. It will be interesting to see the outcome of the new round of confrontation between the creditor and the borrower.