Friday, 19 July

Debt Ridden Armavia: Is Baghdasarov’s Financial Gambit Doomed to Fail?

Despite the fact that Armavia Airlines was declared bankrupt by the court, the company was registered as Armenia’s 11th largest taxpayer last year.

The company, owned by Mikhail Baghdasarov, paid 7.2 billion AMD (US$15,102,000).

The bankruptcy ruling was initiated by one of Armavia’s shareholders, a company called Mika Limited, which, not surprisingly, is also owned by Baghdasarov.

Mika Limited is not registered in Armenia but in the Jersey Islands; an offshore zone. Nevertheless, lists the company’s offices at an address in Yerevan (5 Belyakov Street) where two other companies are located – Mika Corporation and Aviafin.

Mika Ltd. went to court in September 2014, arguing that Armavia owed it $38,378,000 and that the deadline for payment was April 30, 2014. Armavia did not dispute the debt.

The court declared Armavia bankrupt on October 6 and appointed a bankruptcy administrator for the airline. Other creditors appeared on the scene and the company’s assets were seized.

Preliminary data show a total of 153 creditors waiting in line to be paid. The bankruptcy administrator drafted an eight stage list for compensation. Those first in line include Unibank ($6.666 million), Armenian Development Bank (680.285 million AMD), AmeriaBank ($1.250 million), and Armenian Business Bank ($10.427 million and 17,835 Euros).

Other creditors waiting to be paid include K-Telecom, Karkomavto, Hayaeronavigatsia, Armenia’s Ministry of Finance and the Electric Network of Armenia.

Mika Limited, the company that filed the bankruptcy case in the first place, is at the bottom of the pile; in the eighth stage.

Mika Corporation, another company founded by Baghdasarov, is in the seventh round of creditors to be paid.  It is also in debt – more than $28 million AMD and $792,014.

When one company owned by Baghdasarov took another to court to be declared bankrupt, the press in Armenia described it as a move to transfer money from one pocket to another and that Baghdasarov was taking his business out of Armenia.

But, if Mika Limited remains in the 8th round of creditors to be paid, it is difficult to see how Armavia’s assets will be sufficient to pay the money owed it. 152 creditors are ahead of Mika Ltd. in the waiting line.

In other words, Baghdasarov’s financial gambit is doomed to fail.

P.S. Hetq will write about the history of Armavia and its unfortunate demise in upcoming issues.

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Comments (6)
1. Varouj07:47 - 4 February, 2015
What a joke $15,000 in taxes makes you the 11th largest taxpayer in Armenia? Here in the US the average worker pays $15,000 a year!
2. Հայկազ09:51 - 4 February, 2015
ղարբաղի սարերից եկած ու մեր ջանին ընկած գելերից մեկն էլ էտ ա է, հարուրավոր մարդու ծովը լցրին խեղտեցին իրենց նավթի եկոնոմիայի համար
3. zohrab11:29 - 4 February, 2015
Trur its s small tax
4. Մեկը16:32 - 4 February, 2015
Varouj, Թվերը ներկայացված են հազար դրամներով, այսինքն՝ ոչ թե 15 հազար, այլ 15 միլիոն դոլար:
5. raf19:06 - 1 March, 2015
Armavia was a perfect example of how oligarchs do business in Armenia. People who don't know anything about business and management have turned billionaires over night and hold monopolies in different markets. I am so glad that they are finally out and I hope he will take his businesses out of Armenia, even if that means millions of dollars leaving the country. These people are like cancer, as soon as they touch a business sector they will completely destroy it. In a small county like Armenia, he was trying to create a large carrier something similar to AF or Delta!! He kept leasing planes and launching new flights without any real plans. I remember when he launched new flights to destinations like Slovakia and Bahrain!!! And that is in case it was difficult for people in neighboring Iran to find Tehran-Yerevan tickets!! Instead of trying to become one of the bigger guys, you need to learn how to survive in the aviation market by changing the rules of the game.
6. kevin 11:52 - 2 March, 2015
Anyone knows who is the creditor for Armavia B737s?
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