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. Last Updated: 07/27/2016

Mil Factory Gets 6th Chief in 18 Months

A federal court Monday turned the clock back on Moscow's historic Mil Helicopter Plant by ruling to replace its current external bankruptcy manager with the previous one.

The court ruled that a lower court's October appointment of Vladimir Bogacharov was illegal and ordered the reinstatement of Leonid Zapolsky.

"It is so unexpected. … Everything that was done in the last month is all blown," said Mil spokesman Vadim Mikheyev in a telephone interview Tuesday.

Zapolsky is the sixth court-appointed manager at Mil since the summer of 1999, when the factory went bankrupt with debts estimated at about $11 million. Zapolsky himself has now been appointed a record four times. His three previous appointments were annulled by a Moscow court.

The battle to save the troubled factory is being watched with interest around the globe. Since World War II, the Mil plant has exported thousands of helicopters to 70 countries, in deals worth a total of about $7 billion, and has at the same time provided 90 percent of the Russian army's helicopters.

But if it once held a quarter of the world's helicopter market, today Mil — the plant is named after Mikhail Mil, a Soviet-era helicopter engineer — is struggling to survive. Zapolsky, who says he wants to do just that, was last removed Oct. 12 after more than a year in office.

In that decision, the court ruled that "[Zapolsky] sold off, without the agreement of the committee of creditors, four Mi-26T helicopters and one Mi-17B helicopter and used this money to acquire some securities of dubious origin — including promissory notes of [major creditor] MIB and Gazprom."

The models Mi-26T and Mi-17B are worth about $8 million each.

Zapolsky's plan had been to launch a new share issue that would increase the government's stake in the plant to just over 50 percent, reduce the stakes of foreign shareholders to just 25 percent and use an unspecified amount of the remaining shares to pay debts to Moskovsky Mezhregionalny Bank, or MIB, which would have a blocking share.

Mil has exported $7 billion worth of helicopters to 70 countries since World War II.

MIB is the plant's biggest creditor, and it enjoyed friendly relations with Zapolsky, whose plan was also supported by the State Property Ministry, the Federal Bankruptcy Agency and Russian aviation agency Rosaviakosmos.

As of last summer, the government owned 31.5 percent of Mil, and foreign investors controlled 42 percent. Zapolsky managed during his previous tenure to reduce the foreign share to 12.63 percent, a figure that still stands.

In last October's ruling, the court expressed alarm that the restructuring was moving too slowly and installed Bogacharov — to the dissatisfaction of MIB, which immediately sued to reinstate Zapolsky.

Bogacharov's restructuring plan was essentially the same as Zapolsky's, but with a noticeable difference — the blocking stake would go to the State Investment Corp., or Gosincor, an investment company that belongs to the property ministry and is held by Guta Bank.

Bogacharov and his partner, Gosincor, rapidly pushed MIB aside as the dominant player in building Mil's future.

Gosincor bought up the debts of Mil's smaller creditors and paid $600,000 of the $3 million it owes to MIB.

Sergei Surov, deputy board chief of MIB, said Tuesday that if a peaceful agreement can be signed soon, then the external management will be over and creditors can discuss a new share issue.

"This unfortunate plant has been shaken for too long," Surov said. "It's time to resolve all the problems and get back to work."

Unfortunately, Mil's twisted saga may be no closer to ending.

Now that Zapolsky is coming back and MIB is happy, Gosincor and Bogocharov are not.

"Until we sort it out in court, Gosincor is still a major creditor," Gosincor spokesman Roman Khlyustikov said Tuesday.

And although Zapolsky himself could not be reached for comment, his spokesperson said that he had "no intention of leaving his office."