As previously disclosed by the Kernel Holding S.A. (“Kernel Holding”) since 2012, it has been involved in continued disputes with Mr.Stadnyk, his former spouse and certain entities controlled by them (collectively, the “Stiomi Sellers”) in connection with the acquisition of LLC Stiomi Holding (“Stiomi Holding”), a farming company located in the Khmelnytskyi region of Ukraine. In April 2012, Kernel Holding and some other buyers (collectively, the “Stiomi Buyers”) entered into master purchase agreement to acquire Stiomi Holding from the Stiomi Sellers, and as of 30 June 2018, the consideration paid for Stiomi Holding by the Stiomi Buyers amounted to US$24 million. A final payment was due and payable only after fulfilment of certain conditions to the satisfaction of the Stiomi Buyers and subject to rights of set-off in respect of claims against the Stiomi Sellers. The Stiomi Buyers submitted several claims to the Stiomi Sellers in respect of the non-fulfilment of the Stiomi Sellers’ obligations. In December 2012, the Kernel Holding received a request for arbitration from the Stiomi Sellers in which the Stiomi Sellers claimed amounts alleged to be payable to them.
In February 2018, the arbitral tribunal delivered its award, which was partly challenged by the Stiomi Buyers in the High Court in London. Attachment orders were obtained by the Stiomi Sellers in Switzerland, but were ultimately dismissed by the Geneva Court of Appeal.
In March 2019, the High Court in London remitted the award to the tribunal for reconsideration in certain respects and a further hearing took place before the tribunal in September 2019. The tribunal’s revised award, which was delivered in December 2019, required the Stiomi Buyers to pay an aggregate amount of approximately US$30.3 million to the Stiomi Sellers.
New attachment orders were obtained by the Stiomi Sellers in Switzerland against assets owned by Kernel Holding and some of its subsidiaries and joint ventures. The attachments on assets of the subsidiaries and joint ventures were considered unlawful and lifted. The other ones are still in place today.
Kernel Holding has continually recognised a provision in its balance sheet regarding the arbitral award and the related proceedings since 30 June 2018. The provision represents the management’s best estimate of the maximum future outflow that will be required in respect of the award. The carrying amount of the payables for legal claims was approximately US$34.6 million as of 30 September 2020.
Kernel Holding has been prevented from paying the arbitral award by actions of third parties. In particular, former counsel to the Stiomi Sellers has obtained an attachment order in Luxembourg against the Stiomi Sellers, which prevents Kernel from paying any amounts whatsoever to the Stiomi Sellers until the attachment order is lifted. In addition, a third party brought claims asserting that the former spouse of Mr Stadnyk assigned her claims to such party, which Mr. Stadnyk disputes. Due to these conflicting claims and proceedings, Kernel Holding has been unable to date to discharge its payment obligations in respect of the arbitral award to the Stiomi Sellers, pending the resolution of these issues.
As a result of these contradicting claims, in March 2020, Kernel Holding has requested Swiss courts to authorize full discharge of the amounts due under the revised award on the court’s bank account. To the best of Kernel Holding’s knowledge, although the Stiomi Sellers are challenging this request, they claim that Kernel Holding is trying to escape payment. This allegation is obviously contradicted by Kernel Holding’s application to be authorized to pay.
On 16 December 2020, Mr. Stadnyk initiated proceedings in Luxembourg District court in commercial matters, petitioning for bankruptcy of Kernel Holding S.A. An initial hearing in this matter is scheduled for 8 January 2021.
By doing so, Mr. Stadnyk plainly ignores the attachment order rendered in Luxembourg prohibiting Kernel Holding to pay any amount whatsoever to the Stiomi Sellers.
Mr. Stadnyk also overlooks the pending discharge authorization request pending in Switzerland whose purpose is to pay the full amount due while avoiding the risk to pay twice the same amounts claimed by different alleged creditors.
Pursuant to Luxembourg law, a company is considered bankrupt when both of the following conditions are proven to the court: (i) it can no longer pay its debts (“le commerçant qui cesse ses paiements”); and (ii) it has no possibility to raise additional loans (“le commerçant dont le crédit se trouve ébranlé”). Kernel Holding satisfies neither of these tests. Kernel Holding and its subsidiaries (collectively, “the Group”) have a strong liquidity position, with cash on hand and operating cash flows providing ample sources of liquidity for ongoing debt service. As of 18 December 2020, Group had US$ 266 million of cash on accounts. In addition, the Group has access to a number of new sources of funding both from international banks and from capital markets, as demonstrated most recently by its successful placement of US$300 million 6.75% Eurobonds. As such, the Kernel Holding considers the petition submitted by Mr. Stadnyk frivolous and flagrantly vexatious and intends to seek a dismissal of the case by the Luxembourg District court as promptly as possible, as well as damages for the prejudice caused by Mr. Stadnyk’s actions.
