Engine of the Revolution to Start by Year-End

A new investor appeared at the bankrupt machinery building plant RUMO (called Engine of the Revolution in the Soviet era). The eponymous RUMO JSC rented 9 ha of the bankrupt company’s site together with the main assembly building in order to streamline the production. Since last year, the new company’s employees have been restoring the shops and machinery. The official start-up of the plant is planned for the end of the year, when RUMO JSC is expected to have passed the Gazprom audit and launched a full-scale production. However, the restoration prospects will depend on RUMO OJSC, the leaseholder, whose debt burden still amounts to RUB 1.7 bn. The plant is still undergoing a bankruptcy administration procedure but might be imposed receivership due to the huge creditor claims.

On the site of the dilapidated RUMO plant that has been bankrupt since 2016, some shops are now being restored and equipment repaired. The shareholders of the eponymous RUMO JSC intend to restore the production of compressors, electric power plants and engines. The company was purchased from the local founders by shareholders from Moscow, who remain undisclosed. According to the company’s General Director Oleg Bessonov, the beneficiary is a large group of companies engaged equipment deliveries for the O&G sector. Our contacts on the market have stated that the joint-stock company’s beneficiary is a Russian oligarch close to the Kremlin and supported by NK Bank, which is the bankrupt plant’s main creditor based in Nizhny Novgorod.

Last August RUMO JSC rented 9 ha, including the main mechanical assembly shop, from the bankrupt company for seven years (with the total rented area amounting to 48 ha), and it took less than a year to completely restore two shops with cranes; and there are a few more shops where room repairs and the restoration of the bought-back machines are still ongoing. As Oleg Bessonov recounted, the investor declined to advertise its presence in Nizhny Novgorod because the official start of production had been planned for late 2020, when RUMO JSC is expected to have put its test rigs in operation and passed Gazprom’s final audit. So far, in parallel with shop repairs, the company, in cooperation with REP Holding, is taking part in the production of compressor stations for Gazprom's gas transportation systems.

“We plan to organize a modern full-cycle production and inherit to the traditions of the 130-year-old RUMO plant that used to produce unique machines”, said Mr. Bessonov. According to him, first and foremost, the company was planning to develop the production of small-power equipment and generators, compressor stations and gas pumping units and, in the three-year prospective, to streamline the production of ship engines and power units (our company has received a Russian River Register Certificate). The director also added that their management team, which had come from Saint-Petersburg, succeeded to get back to work a number of former employees from of the Nizhny Novgorod plant. So far, the total headcount is about 200 employees but the plans are to ramp up the production and expand the staff to 650 employees.

Meanwhile, RUMO JSC’s further development will strongly depending on the future of the bankrupt RUMO OJSC, whose production site is gradually dilapidating. Last February, by the initiative of the pledge holders NK Bank introduced bankruptcy administration for 18 months so as to restore the debtor’s creditworthiness. However, the other creditors including, in particular, the Federal Tax Service and the electric power provider TNS Energo Nizhny Novgorod, who guaranteed its electrical supply, challenged the available bankruptcy administration plan on the grounds that it was not confirmed by calculation and was not aimed at the bankrupt company’s turnaround but at the soonest possible sale of its assets, which was infringing on the creditors’ rights. In June, when considering RUMO OJSC’s bankruptcy case, the regional arbitration court accepted these arrangements and ruled the plan to be invalid. It was recommended that Mr. Ilya Anisimov, the bankruptcy administrator, draw up a reasonable plan to meet the creditors’ interests. The first bankruptcy administration period ends in March 2021, thus the bankrupt company’s top management still have time for preparation and, most importantly, for some anti-crisis actions. Given the missing consent between the different groups of creditors and the total amount of the registered claims against the debtor exceeding RUB 1.7 bn, it is highly probable that the company’s property will be put on sale. In this case, the property to be sold will include the shops repaired by the investor.

RUMO JSC’s General Director Oleg Bessonov announced that the company was considering different scenarios of further development including participation in the bidding procedures to repurchase the plant’s assets since they had already invested “hundreds of millions of rubles” in the repair and restoration activities, machinery purchasing and organization of pilot production. In the coming months, the investor intends to complete the construction of its own boiler house and agree with the Inter-Regional Distribution Network Co. on separated power supply so as not to depend on the bankrupt company’s networks. The government of Nizhny Novgorod Oblast promised to support the idea of re-launching the production at RUMO.

After visiting the renovated shops in July, Mr. Evgeny Lyulin, First Deputy Governor of Nizhny Novgorod Oblast, reminded that in the previous years the plant “had been saved from embezzlement several times”, and potential investors had been brought in. However, none of them succeeded in turning the company around, and the authorities almost forgot about it. “There was even a moment when I told one of the plant’s managers: That’s it, we’re stopping to help you. If you don’t want to work, we cannot make you do it. But looks like RUMO is really starting its new life now. We will definitely help those who are willing to work themselves”, wrote Evgeny Lyulin in his Instagram promising assistance in negotiations with potential customers.

Kommersant (Nizhny Novgorod) no.129 dated