Bank of Georgia and Rustavi Azot Questions Raised over Mystery Asset Lease Back

According to recent public filings by the Bank of Georgia, whose shares have been traded on the London Stock Exchange since the bank’s IPO in 2012, the assets of Rustavi Azot have been leased out to an undisclosed party, with growing speculation and concern that the assets are now back in the hands of controversial former owner Roman Pipiya.

This is likely to raise alarm bells for the remaining employees of Rustavi Azot, who already saw 350 employees wrongfully dismissed, exacerbating the already challenged social-economic situation in Rustavi.  The dismissals prompted mass protests on the streets of Tbilisi and at the gates of the Azot plant.

The assets of Rustavi Azot have already effectively changed hands on multiple occasions in recent years through a series of murky transactions including a stealth auction organized by Bank of Georgia – a process riddled with irregularities and seemingly in clear breach of disclosure obligations to the company’s creditors.  

The Bank of Georgia sent notification to European Bank for Reconstruction and Development (EBRD) only two days before the auction was held, and only in Georgian language, and failed to inform other key counterparties.  

The “winner” of the auction was E U Investments, a shell company that was incorporated several days before the auction and the sole owner of which is Efrem Urumashvili, a former Deputy Financial Director at Bank of Georgia.  What is more, Mr Urumashvili financed the acquisition using a loan which he secured from none other than Bank of Georgia.  

There have already been calls for the auction results to be annulled, and to be held again – this time ensuring that the process is carried out in a transparent way, with the EBRD and other creditors being duly informed.

Sources in the market believe that the assets have now been leased back to former owner Roman Pipiya, which, if confirmed, will give little comfort to the company’s remaining employees, who, given Mr Pipia’s previous track record with these assets, could be forgiven for believing their future at the company may be hanging in the balance.

By Giorgi Kapanadze