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The Great Grain Grab: Ukrainian companies are facing takeover attempts by US Hedge funds “for their own long term gain”

(Image credit: octave @depositphotos)

“War has always been a racket, and it is possibly the oldest, easily the most profitable, and, surely, the most vicious,” said Smedley Butler, once the most decorated US Marine in history before becoming an author and anti-war advocate.

Before dying in 1940, Butler said that during his 33-year military career, he was primarily “a high-class muscle man for Big Business, Wall Street, and the bankers.”

The war in Ukraine seems to be taking a similar path. War profiteers have already made billions of dollars from death and misery in the country. A Reuters report reveals oil companies made nearly $220 billion in profits in 2022, “a windfall of Russia`s invasion of Ukraine,” as President Joe Biden recently critiqued.

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When the war ends, rebuilding Ukraine will represent a trillion-dollar opportunity for US and European construction companies, who are already planning how to get their hands on those profits.

Opportunist hedge funds have also emerged as significant war profiteers. According to the Guardian, they raked in nearly $2 billion in Q1 2022 alone, but worse yet, their corporate greed has hampered the Black Sea Grain Corridor talks, putting profit before global food security.

In July, Russia refused to renew its participation in the Grain Corridor, ending safety guarantees for Ukrainian ships and thereby essentially cutting the ability of Ukrainian companies to export grain via the Black Sea, although some shipping activity has reportedly continued despite the risks.

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The so-called grain corridor was crucial to safely move produce outside of Ukraine, particularly as global food prices have increased. The Black Sea grain deal represents a lifeline for “79 counties and 349 million people on the front line of food insecurity,” the International Rescue Committee said.

Ukraine set up its own trade route in August to move food exports out of its Black Sea ports near Odessa, defying Russian threats. (United Nations/Lisa Kukharska)

Shortly after the start of the war, Ukrainian companies began facing demands from Western creditors for loan repayments and subsequent hostile takeover attempts, once the creditors realized it was more lucrative to try to take over the assets themselves than to agree to debt repayment schedules. Unlike Western governments that have provided unequivocal support to the Ukrainian government, these American creditors have shown limited flexibility in the wake of the war that made businesses unable to operate. 

Hostile takeover tactics

Argentem Creek Partners (ACP), an American distressed asset fund, was legally prevented from taking over a grain terminal owned by GNT Group (GNT) in the Odessa Commercial Sea Port. GNT’s shareholders sought and succeeded in getting a Nicosia District Court order against ACP because of its aggressive takeover actions.

Yet, ACP and another US hedge fund, Innovatus Capital Partners (Innovatus), have waged a legal, media, and political battle against GNT in a bid to take over the company after it failed to repay its debt to the hedge fund immediately after ACP abruptly issued a demand. 

ACP began pursuing GNT legally in Ukraine, the United Kingdom, Cyprus, and elsewhere and is now seeking to take control of the grain terminal, accusing the Ukrainian owners of the terminal of corporate mismanagement and fraud. ACP has keptpushing to force GNT into bankruptcy in Ukraine, just in November succeeding in getting the Ukrainian Supreme Court to uphold its bankruptcy efforts in Ukraine. 

ACP’s extensive legal and lobbying efforts, however, raise questions about its tactics. In Ukraine, ACP is represented by Hillmont Partners, a law firm known for its closeness to the presidential administration of Volodymyr Zelenskyy. At least three Hillmont Partners lawyers were on the list of proposed members of parliament nominated by Zelenskyy’s Servant of the People party after his election in 2019. Denys Monastyrskyi, Zelenskyy’s Minister of Interior until his untimely death in a helicopter accident earlier this year, previously served as a lawyer with Hillmont Partners. In the United States, ACP has spent over a million dollars on lobbying fees related to Ukraine since beginning its enforcement efforts against GNT at the end of last year, using the high-powered American law and lobbyist firm Akin Gump. Based on prior reports, ACP has actively pressured the American Embassy in Kyiv to assist its efforts to take over GNT’s Odessa terminal. 

Profiting from the war

“Despite Innovatus’ and ACP’s continued support for GNT, including the offer to postpone loan payments following Russia’s invasion, investigations revealed that the company liquidated all grain pledged to Innovatus without notice or consent,” the hedge fund group stated the time.

John Patton, ACP’s Head of EMEA & Asia, accused GNT of stealing or pilfering $130 million of inventory. “So, we decided to enforce, which was not an easy decision because obviously, we recognize there’s a war on, at the same time, they’ve had 22 attempts at injunctions.” 

Ukrainian companies have described ACP’s efforts as war profiteering, while ACP and other Western creditors insist that they merely continue their business and accuse those companies of corruption. 

GNT states the US fund is opportunistically profiting from the war by trying to take over the company at a massive discount. The Ukrainian company, according to sources, is still open to settling and repaying its debt while the dispute is disrupting the operations of the grain terminal to the detriment of global food security.

Crucially, the grain terminal in Odessa was one of the few key players involved in the now-suspended grain corridor initiative between Ukraine and Russia.

Media bias?

On the legal side of this takeover attempt, the London Court of International Arbitration (LCIA) is the main dispute venue. The LCIA is hearing a case about GNT, the critical Ukrainian operator at the Odessa Port Terminal, which has been consistently bombed by Russia.

GNT is also a key player in the widely covered, and for now suspended, Black Sea Grain Corridor, and while the US plaintiff, ACP, has been successful in getting massive coverage of its dubious allegations, no serious Western journalists have covered the position of the Ukrainian parties.

ACP obtained a Worldwide Freezing Order in the UK’s High Court in January 2023, which the hedge fund continues to tout in an apparently complicit Western media. 

Meanwhile, even RT, the Russian-state owned news network that has served as a mouthpiece for official Russian state positions globally, has used the dispute for its own purposes, making comparisons between ACP’s allegations against GNT and unfounded claims that Western weaponry supplied to Ukraine has ended up in the hands of Mexican drug cartels, undoubtedly contributing to Russia’s justification of its refusal to renew its participation in the grain corridor.

Unanswered emails 

As exclusively revealed to this news organisation, two prominent Ukrainian companies, Brooklyn-Kyiv and Kadorr Group, have tabled offers to buy out the loans. Curiously, despite constantly and repeatedly looking for a response, the US hedge funds do not reply. 

ACP and Innovatus received separate and independent offers from the Kadorr Group, owned by Syrian-Ukrainian businessman Adnan Kivan, with interests from grain to construction to media, and then from Brooklyn-Kyiv, a major stevedoring company in Odessa owned by Yuriy Gubankov

The offers were made back in August of this year, but ACP and Innovatus have not followed up and ignored further enquiries and calls. 

Gubankov of Brooklyn-Kyiv, which has more than the $70m in reserves needed to buy out ACP’s claim to the GNT Group to ensure it remains in Ukrainian interests, has a theory:

 “I have called, emailed, sent numerous SMS’s to John Patton and he always promises to call me back, but he never does. It seems to me that they don’t want to sell, as this terminal can make them more money in the long term,” he says on a phone call. “It is a very complicated and complex situation,” Gubankov continues. “Nobody really knows what state the terminal is in. There is a war going on and access is limited. But it is a great pity that nothing is operational now because of this stand-off. 

Kadorr Group has also revealed documents exclusively to this news organisation intending to offer the US Hedge funds 85 percent of GNT’’s current market value.

“It is no surprise that these requests have gone unanswered,” concluded Gubankov. “The US Hedge funds are doing all they can to ensure they can liquidate GNT for their own long-term gain.”

Representatives of ACP and Innovatus were approached for comment but did not respond. 

Ana Firmato, Managing Director at Innovatus, has previously stated: “ACP and Innovatus remain committed to their mission of promoting private investment activism as a means to combat corruption in Ukraine and will continue to invest in projects that align with these objectives.”

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