Avangardco hits back against threat to Crimea farm

Avangardco warned of a potential legal challenge to plans to seize "illegally" Crimea's largest poultry farm, the latest of a series of setbacks to its operations from the Ukraine crisis.

The Kiev-based egg producer, controlled by agriculture and gas billionaire Oleg Bakhmatyuk, said that it "welcomes an open discussion" over the future of its Yuznaya Holding farm, after Crimea's Russian-backed government proposed the compulsory purchase of the site.

However, the group, which is listed in London, also flagged its right to defend in national and international courts "any illegal claim on its assets".

Mr Bakhmatyuk, who in 2011 brought Avangard under the wing of his Ukrlandfarming agribusiness giant, has separately urged Crimean authorities to reconsider their intention to "illegally seize private assets and start an open dialogue with the management regarding future business plans of Avangardco poultry farm on the Crimea peninsula".

Ukraine crisis setbacks

The disputed assets represents only a small part of the Avangard empire, comprising some 3% of capacity as measured by layer hens, which as of the end of June numbered 22.8m group-wide.

Indeed, the group wound down operations in Crimea, where it also owns a breeder farm, after the occupation of the region by pro-Russian forces.

However, the threatened compulsory purchase represents a further toll on the group from the Ukraine crisis, which has also seen the occupation of a feed mill by pro-separatist militia in the east of the country, where Avangardco has also reduced operations at poultry farms in Donetsk and Lugansk regions.

These represent larger operations, responsible for 22% of group laying hens as of the end of 2013, and 19% of group revenues last year.

'Threaten financial flexibility'

Indeed, Fitch Ratings on Monday said that "the political uncertainty in Ukraine, including Avangardco's exposure to eastern Ukraine regions… may ultimately threaten the group's financial flexibility and its ability to meet its debt obligations".

However, Fitch, noting also the group's "low leverage", restated the group's rating of CCC, the same as the Ukraine sovereign rating.

The rating agency added that it consider as "critical for further development and improvement of the company's business risk" Avangardco expansion into export markets, which accounts for 29% of revenues last year.

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