Beijing Tianjiao Aviation Industry Investment Co (also known as Skyrizon) will have an even more difficult time retrieving funds from Ukraine after its botched acquisition of Ukraine-based aircraft engine manufacturer Motor Sich, the parent company of passenger charter specialist Motor Sich Airlines (M9, Zaporizhzhia), as the war-torn country has opted to suspend all foreign debt repayments until October.

In a decree signed by President Volodymyr Zelensky, Ukraine suspended all foreign debt payments until October 1. The move came after Kyiv announced a restructuring deal with its main bondholders that ended on August 1 to avoid a default in July.

The move adds additional complications to Beijing Tianjiao Aviation Industry Investment after the investors, alongside a group of other Chinese companies, demanded full compensation valued at over USD4.5 billion before an arbitration court in The Hague for losses incurred after Ukraine nationalised Motor Sich.

The Chinese investors purchased 56% of Motor Sich shares in 2016, and three years later submitted antimonopoly documentation in Ukraine. However, the Security Service of Ukraine seized the Chinese stake and in 2021 Ukraine sanctioned the Chinese companies, as well as Beijing Tianjiao co-owner Wing Jin. Motor Sich was nationalised in March 2021 and Ukraine’s Foreign Ministry confirmed at the time that the Chinese investors had the right to be compensated in accordance with the investment contract.

That same year, former Motor Sich CEO Vyacheslav Boguslaev, who had been a supporter of the Chinese investment, was arrested for “transferring military goods to occupiers, in particular aircraft engines to Russia.”

The situation for the Chinese company is additionally complicated by the fact that Boguslaev, who was a majority shareholder in Motor Sich before the investment, lost a court battle in July before the High Anti-Corruption Court of Ukraine, which resulted in the seizure of his property worth over UAH12 billion hryvnia (USD293 million). These assets have been moved to the Ukraine’s State Property Fund. The case also involves the property of Petr Kononenko, former head of Motor Sich’s Moscow representative office.

Motor Sich Airlines is a fully-owned subsidiary of the engine manufacturer. It operates one 58 year-old An-12(BP) and one 56 year-old An-12BK, ch-aviation fleets reveals.