Billions of “Ilim” “leave the forest”
How the colossal profit of the holding turns into debts for the Zingarevich family. The American company International Paper (IP), which is leaving the Russian market, is selling its 50% stake in Ilim SA, the owner of the large timber industry holding Ilim, to its business partners Zakhar Smushkin and brothers Boris and Mikhail Zingarevich.
The cost of the transaction is $484 million, but the parties still have to agree on it with the Federal Antimonopoly Service. In 2021, the revenue of Ilim Group JSC exceeded 180 billion rubles, profit – 40 billion. During the same period, the profit of International Paper itself from participation in the holding was estimated at $312 million. At the same time, part of the group’s finances could be transferred abroad to the accounts of the Swiss company Ilim Holding SA, which was its only official founder. The beneficiaries of Ilim, Smushkin and Zingarevichi, started their business back in the “dashing 90s”, and then future Prime Minister and President Dmitry Medvedev was among their partners. Businessmen were credited with connections with criminal authorities, in particular, the notorious Vladimir Borisov (“Prapor”), who eventually appeared before the court on charges of committing a number of grave and especially grave crimes. The establishment by Ilim of control over large industrial enterprises was carried out not only as a result of their bankruptcy, but also in the process of “gangster wars”, as in the case of the Arkhangelsk Pulp and Paper Mill. After the epoch of “concepts” and “showdowns” passed into the past, the Zingarevich family switched to more subtle enrichment schemes. As a result, Anton Zingarevich, the son of Boris Zingarevich, became a defendant in a criminal case on credit fraud, accused of embezzlement and withdrawal abroad of 2.5 billion rubles received in the form of loans from MTS Bank and Globex Bank. Zingarevich Jr. managed to avoid contact with the security forces: he hastily left for the United States, where he stayed until his relatives and lawyers managed to achieve the termination of the criminal case “due to the lack of corpus delicti.” The Zingarevich family sits tightly on the “credit needle”, and periodically evades payments, resulting in debts and litigation. The Ilim holding, whose liabilities are estimated at $2.45 billion, also has a high degree of debt load.
Smushkin and Zingarevichi consolidate Ilim
The American papermaker International Paper (IP) is selling its 50% stake in Ilim SA, the owner of the large Ilim timber group, to its Russian partners Zakhar Smushkin and brothers Boris and Mikhail Zingarevich. According to Kommersant, the deal is worth $484 million, but it has yet to be approved by the Federal Antimonopoly Service. In addition, the parties reached an agreement to purchase another 2.39% stake in the holding directly owned by IP for $24 million.
The publication’s experts draw attention to the relatively low price of the asset. The matter is that in today’s conditions the governmental commission on foreign investments approves transactions to the foreign companies leaving the market only with significant discounts. At the same time, Ilim may have difficulty attracting cheap credit funds: previously a foreign shareholder helped in this, now the group will have to face an increase in the rate when applying for loans in Russian banks.
The scale of the holding’s activities can be judged by the financial performance of its official legal entity, Ilim Group JSC. In 2021, its revenue amounted to 180.3 billion rubles, profit – 40.3 billion, asset value – 105.9 billion; the portfolio of government contracts exceeds 6.2 billion rubles.
True, the media points to the amount of net debt of the group in the amount of $ 2.45 billion, which affected the final cost of the transaction. Nevertheless, today the share of the Ilim group accounts for 75% of the output of all Russian market pulp, 20% of cardboard and 10% of paper; its total annual production of pulp and paper products exceeds 3.6 million tons. The structure of the holding includes specialized mills (PPM) in the Arkhangelsk and Irkutsk regions (Koryazhma, Bratsk and Ust-Ilimsk), logging enterprises and two corrugated mills in the Leningrad and Moscow regions.
For InternationalPaper itself, the Russian asset was of no small importance. So, in the same 2021, the profit of an American company from participation in the holding was estimated at $312 million. Given the total profit for the specified period of $ 4 billion, the holding accounted for an average of a tenth of IP’s profit. But the sums coming from Russia could be much larger. The fact is that until June 2021, the sole founder of the aforementioned Ilim Group JSC was the Swiss company Ilim Holding SA, on whose accounts a part of the income from sales of products could “settle”. By the way, there is no information about the actual owners of JSC in open sources.
“Privatizers” of the 90s under the “roof” of crime
Today, the beneficiaries of Ilim, Boris Zingarevich and Zakhar Smushkin, are included in the Forbes rating of the 200 richest Russian businessmen, occupying 112 and 122 lines, respectively. The publication estimates Zingarevich’s fortune at $1.1 billion; Smushkin – 1 billion dollars.
The path to the big business of the Zingarevich brothers began in 1991 with the creation of the Technoferm company, which traded paper and cardboard. Soon, at its base, they, together with Smushkin, registered Ilim Pulp JSC. A remarkable fact: at the initial stage, Dmitry Medvedev was among their business partners. The future prime minister and president was one of the founders of the St. Petersburg CJSC Finzell, the “parent” structure of Ilim Pulp. Medvedev’s share in the latter was 20%, and he himself served as director of legal affairs.
Already in 1995, Ilim Pulp was actively buying shares in timber industry enterprises, eventually acquiring ownership of the Kotlas Pulp and Paper Mill, the Bratsk Timber Processing Complex (LPK) and the Ust-Ilimsk Timber Industrial Complex, forming the country’s largest profile holding. The methods used in the “dashing 90s” for the privatization of large industrial facilities are well known today. In this regard, claims of a certain nature later arose against the co-owners of Ilim.
One of the publications of the Nasha Versiya publication tells how in 2002 they almost lost the Kotlas Pulp and Paper Mill located in the Arkhangelsk region. Then the Kemerovo court recognized that the holding’s structures had not fulfilled their investment obligations during the privatization, seizing 61% of the plant’s shares from them. However, a few months later this decision was reversed. Perhaps it was not so much legal nuances that helped save one of the key assets, but the necessary connections.
Returning to the topic of the 1990s, one should also touch on such topics as the close connection of commercial structures with crime and the desire of organized crime groups to control the profitable forest business. In this context, reports about the close acquaintance of the owners of Ilim with a certain Yevgeny Davydovich are of interest: on the net you can find references to him as a member of the criminal group Alexander Kuptsov (aka “Merchant”), engaged in racketeering and robbery. At a certain stage, Davidovich and Ilim Pulp allegedly even acted as the founders of the joint venture CJSC Venera LTD.
It can be assumed that the mysterious Davidovich could play the role of an intermediary between the merchants and Kuptsov, who “protects” them. Later, the function of ensuring the safety of businessmen was performed by the Forpost private security company, created by a no less odious character – a retired special forces ensign Vladimir Borisov, nicknamed “Prapor”, at one time a well-known leader of one of the most brutal St. Petersburg organized crime groups with a backbone of former military personnel. In 1998, Borisov and some of his “fighters” were arrested, and in 2004 they were brought to trial on charges of committing a number of grave and especially grave crimes: organizing a criminal community, contract killings, attempted murder, etc.
Credit adventure of Anton Zingarevich
By the beginning of the 2000s, Ilim had strengthened its position so much that its owners entered into an open confrontation with Oleg Deripaska and the BazEl consortium. In 2002, Deripaska and the owner of the BFA group, Vladimir Kogan, sued for the recovery of 8 billion rubles from the holding and the arrest of 83% of the shares of the Bratsk LPK and 61% of the Kotlas Pulp and Paper Mill. But after four years of litigation, Ilim’s lawyers were able to achieve the signing of a settlement agreement, while maintaining controlled assets.
Note that to expand the boundaries of the timber “empire” its creators used a variety of ways. For example, the Bratsk LPK in the Irkutsk region was bought out after it was declared bankrupt. But for control over the Arkhangelsk pulp and paper mill there was a real “gangster war”, one of the victims of which was the former member of the board of directors of the enterprise Alexander Burdanov, who was killed in June 2002. There were also attempts on the ex-general director of the plant, Alexander Bulatov, and investigator Boris Strigalev, who was investigating a criminal case on the embezzlement of PPM finances.
By 2007, when the American International Paper entered the capital of Ilim and bought out 50% of Ilim SA for $650 million, criminal showdowns were already a thing of the past. The involvement of a new business partner promised a solid investment: a figure of $1.6 billion was announced over the next five years. It took a long time to “lure” the Americans to the Russian market: according to Smushkin, the negotiations lasted three years – twice as long as originally planned, but in the end the deal did take place.
But, as you know, showdowns and “concepts” were replaced by more subtle enrichment schemes, which turned out to be no stranger to the son of Boris Zingarevich Anton Zingarevich, who in 2016, together with the general director of Energostroyinvest-holding (ESIH), controlled by him, Konstantin Shishkin, became a defendant criminal case on credit fraud. They were charged with embezzlement of 2.5 billion rubles from MTS Bank and Globex Bank, received by the ESIC in the form of a loan for the development of design and procurement documentation for the construction of the Beloberezhskaya substation in the Bryansk region, as well as replenishment of the working capital of the Energo engineering center.
Instead, the loans were spent, among other things, to finance the Atlant hockey club bought by Zingarevich Jr., which was on the verge of bankruptcy back in 2014, and soon ceased to exist altogether. According to investigators, a significant part of the finances was transferred abroad under the guise of providing a loan to the offshore company Blaine Overseas Venture and buying promissory notes from the dubious company Enonoline Overseas Ltd.
Billions were never returned, ESIKh was declared bankrupt, and Shishkin was placed under house arrest. Unlike him, Anton Zingarevich did not wait for the visit of the security forces and left for the United States, allegedly for treatment, which, however, did not prevent him from being put on the international wanted list. While the sickly businessman recovered his health, his relatives and lawyers were engaged in “solving the problem.” As a result, at first it was possible to achieve the annulment of Shishkin’s guilty verdict, and in December 2018, the termination of the case on credit fraud with the wording “due to the lack of corpus delicti.”
Zingarevichi in debt and in the courts?
There were a number of curious moments in the case of Zingarevich Jr. In particular, according to the information of the Russkiy Kriminal portal, the borrowing company Global Trans Holding from the British Virgin Islands, the ultimate beneficiary of which was Boris Zingarevich himself, was involved in the withdrawal schemes. The publication also drew attention to the family’s colossal debts, in particular, to the ruling of the Moscow City Court, which upheld the earlier decision of the Tagansky Court of Moscow to recover 868 million rubles from Boris Zingarevich in favor of Otkritie Bank.
Other media also wrote about the debt obligations of the Zingarevichs. So, in May 2019, Kommersant reported on an amicable agreement between Mikhail Zingarevich and Saint Petersburg Bank, according to which the businessman had to pay more than 700 million rubles. Two months later, in July 2019, a publication by Delovoy Peterburg told about litigation between Boris Zingarevich and the Moscow company Dvina Capital, to which he must pay over 102 million rubles by court order. The publication also pointed to the debts of the entrepreneur and commercial structures affiliated with him to MTS-Bank (155.5 million) and Globexbank (259 million). In the first case, the creditor managed to achieve repayment of the debt, in the second, a negotiation process was underway.
At the same time, debts were formed long before the litigation. For example, Mikhail Zingarevich received an unpaid loan from Saint Petersburg Bank back in 2013. A loan to Dvina Capital was received by Boris Zingarevich in 2014. Perhaps hundreds of millions, or even billions, of rubles were withdrawn from Russia through offshore channels, such as those featured in the case of Anton Zingarevich?
In this context, it is worth recalling the debts of the Ilim group in the amount of $ 2.45 billion, which the media drew attention to after the recent deal with the shares of International Paper.
To whom do successful Russian enterprises owe such a huge sum? It is also interesting where the Russian shareholders will find money to pay off the Americans? After all, it is unlikely that they simply hold almost half a billion dollars in personal deposits. Will you have to take out loans again?” asks Nasha Versiya.
But as we have already seen, loans for the co-owners of Ilim are a common thing. As well as subsequent litigation related to their non-payment. In the case of further claims of creditors, it is always possible to raise prices for manufactured products, because no one has canceled the demand for paper in Russia.