My 60 Days of Rebuilding Ukraine

This weekend marks 60 days since the Rebuilding Ukraine Agency was founded in order to help Ukraine rebuild from the destruction caused by the Russian aggression. 60 days in the context of what it will take to rebuild the country post-war is a negligible number, and yet the last 60 days were among the most vivid, rewarding and event-filled in my 35-year international business journey. 60 days out of 35 years.

Thus far, it has been almost 90 days that Ukraine has been fighting a brutal, unprovoked war with its Russian neighbor. The war, which caused unimaginable destruction of property and economy, forced millions to leave their homes, cost thousands of lives and hampered hundreds of new births. The war, which caused the entire civilized world to rally around Ukraine and its people, in order to offer unprecedented help and support.

Amidst this global seismic shift, a small group of folks in the US, Canada, Ukraine, UK and EU, have decided that given their extensive international and professional experience, they wanted to help and rebuild Ukraine. Although they did not know when the war would end, what would be the final geographical boundaries, or national security arrangements, these folks were and remain convinced that Ukraine would win and remain independent. They also knew, that regardless of the massive expected reparations, government assistance, loans from international financial institutions and equity investment, Ukraine could use a team of international experts in the fields such as engineering, urban design, agricultural infrastructure, energy, water, healthcare, financing, insurance, legal, compliance and telecom.

They also knew that given the strain on the Ukrainian Government, regional and municipal authorities, as well as on the private business, which was caused by the war, it was necessary to simplify delivery of the rebuilding services and solutions to be offered. They also knew that no matter how much money would be allocated for rebuilding, Ukraine could always use more funding to rebuild and facilitate economic growth. Finally, they knew, that in the world of international bureaucracy, they would need to be nimble and have the capability to react rapidly, make decisions quickly and have a large toolbox of solutions unsurpassed by anyone else. Every one of these folks simply said “I am in, what can I do to help Ukraine rebuild?”

Thus was born the Rebuilding Ukraine Agency – the first international, member-owned, rapid deployment Agency, focused solely on helping Ukraine rebuild after the war. Initially, twenty four professionals and representatives of several companies became members. In the next 60 days, the Agency grew to over 50 members and its growth continues. What follows below, is my personal account of this short, but very event filled journey.

As one of the co-founders of the Agency I have been privileged to quarterback the first 60 days. The emotional highs and lows have been tremendous. Initially, it was difficult to reconcile the fact that with the war raging and missiles flying, people in Ukraine’s liberated cities started rebuilding efforts. The Agency arranged meetings with the Mayors of the war-ravaged towns of Bucha, Borodyanka, Melitopol and holding back tears, its members listened, as the Mayors recounted destruction and atrocities in their cities. The Agency’s Ukrainian-based members visited Irpin and saw first hand the destruction and the scope of the massive rebuilding efforts needed to restore the housing and infrastructure.

I watched, as Agency members from different countries, most of whom who did not know each other previously, started to function as a cohesive team. I watched, as our efforts at the Agency received support and offers of help from the folks at the US Government financial institutions, Ukraine’s investment agencies, and large engineering, agricultural and capital markets firms. I was there filled with joy, when a group of US investors expressed their firm commitment to invest in Ukraine and build a plant to produce badly needed construction materials. I was there, when the Agency forged alliances with the Ukrainian Builders’ Confederation. I participated in very open and candid discussions with a Senior Ukrainian Rada member, the UA Ambassador to the US, US Commercial Service officers, business executives and NGOs and was glad to see that their views on rebuilding the country after the war were mostly aligned. I was amazed to see the level of acceptance and support received through social media platforms. A times, I have been overwhelmed by all the activity required when setting up such an Agency. I am grateful to my team, our members, our attorneys and financial professionals for their support and for their continuing efforts to set this Agency up.

Having US Government maintain availability of Political Risk Insurance and project development grants during the war time, gave me optimism and allowed us to start putting together a pipeline projects, which will need to be financed, as soon as the hot phase of the war ends.

And then there was Nezhin. Although the Agency is not a non-profit, the story of the war-damaged birthing hospital in the city of Chernihiv and of totally underequipped neonatal facility in the city of Nezhin charged with handling overflow of the premie births and births requiring surgeries, moved my colleagues and me deeply. The members of the Agency’s healthcare committee sprang up into action and earlier this week a fundraiser was held, which would enable the Agency to buy, ship and fully oversee the delivery of the badly needed equipment to help rebuild the birthing unit at the Nezhin’s town hospital. More is needed and we will be looking for additional humanitarian funding for this and similar projects.

As all these efforts and meetings were taking place, there were always painful reminders of war. Having air raid sirens go off multiple times during my zoom calls with Kyiv, always caused my heart to race. A three month old baby killed by a missile strike in Odesa, along with his mom and grandma, a shopping center in that city struck by a missile, hundreds of yards from our client’s new construction site, fuel shortages, occupation of Chernobyl and the centralized spent fuel storage facility our team helped finance temporarily falling into the enemy hands…. Our team also came across the dark side and saw that elements of corruption, infighting and malaise were unfortunately are still present in Ukraine war, or no war.

Probably, the most difficult, was the realization that the war is likely to last much longer than I originally thought, thus delaying serious rebuilding efforts and subjecting Ukraine to a much greater human toll, as well as property and economic destruction. Another difficult realization was the understanding that the Agency will not be able to help everyone who will need help. Emotionally this is very difficult to reconcile, amidst the rebuilding needs, which will need to be addressed.

Some years ago, I wrote a book in which I recounted interesting stories and adventures along what was then 25 year international journey. The last 60 days have made every one of those stories pale in comparison and I may one day document the Agency’s and mine journey on what I know will be a constructive and and meaningful effort to help Ukraine rebuild. Slava Ukraini!

Alexander Gordin

Key Person GONE! Is your business protected?

“Risk is caused by people” Robert Lehman

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Risk identification and management have always been vital elements of our Firm’s business. Whether entering new markets, advising clients on financings, or mergers/acquisitions, buying a business, or seeking to protect one’s family, partners, or employees, risk management strategies were ever-present and various insurance tools have been utilized to mitigate those risks. In the next few posts, we will look at various risk mitigation tools businesses can utilize in their domestic and international operations.

With the global spread of the Covid pandemic claiming lives of millions of people, the risks have increased significantly and forced us to take a much deeper look at the potential problems and ways to mitigate them. In this article, I want to focus on a very important, but frequently overlooked risk of losing a key person and explore how a business based in the US, or one entering the US market, can protect itself.

Every business, whether it is a sole proprietorship, partnership, or corporation has folks vital to the ongoing success of that enterprise. Loss of these key people to death, or disability, whether it is CEO, CFO, Head of Sales, Chief Scientist, will have a crippling and costly effect.

So how do key business stakeholders protect themselves? Couple of obvious, but highly underused tools are Key Person Insurance and insurance funded buy-sell agreements.

Key person life and disability policies are meant to compensate the business for losses incurred by a loss of its vital personnel, or shareholders. Such policy premiums are paid by the business and the business will receive any insurance payouts to help cushion the impact of losses. Normally, key person life insurance is structured as a fixed premium 10 or 20 year term policy and the benefit amount of the policy is calculated to compensate for the value of the expected loss. For instance, if a company has a key Sales Manager, who produces $2 million per year in revenue and it is expected that it would take 6 months to a year to replace such a person, a $1 to 2 million term life should be taken out. The investment in such a term policy is negligible compared to the benefits business will receive should a catastrophic loss occur.

Another very interesting situation occurs in closely held corporations, partnerships or sole proprietorships. If an owner, partner, or a significant shareholder succumbs, or becomes disabled, their ownership interests oftentimes pass to the family members, who oftentimes are unwilling, or unqualified to continue running the business, or perform shareholders duties. In such cases, buy-sell agreements should be funded by term insurance policies large enough to cover the fair market value of the ownership interests. In case of a loss of a sole proprietor, the owners family should carry the life insurance/disability insurance to compensate it for the loss of the bread winner. Alternatively, business managers may use a business Key Person policy to buyout the owner’s family and take over the business.

Thus in today’s business climate, any entity not managing its key person risks is remiss and is putting its own survival at risk. To learn more about key person risk mitigation, or to discuss other types of risk management, please email info@broadstreetcap.com

Happy Holidays and Best Wishes for the New Year!

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Broad Street Capital Group selects Lipman Law to provide due diligence support and General Counsel services.

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(December 2, 2019, New York City, NY) In an effort to streamline its legal operations and to manage international due diligence and compliance processes for the $1.2 billion of financing transactions in its pipeline, Broad Street Capital Group announced today that it has retained Alex Lipman of Lipman law PLLC, to provide general counsel services. Alex Lipman has also joined Broad Street as an Advisory Board Member.

Most recently a partner at a major international law firm, Mr. Lipman has almost 30 years of experience both in private practice and government with focus on SEC enforcement matters, anti-corruption investigations, securities litigation, other regulatory and government matters, as well as corporate governance.

Alex’s government experience includes serving as a Special Assistant United States Attorney on the Securities and Commodities Fraud Task Force at the U.S. Attorney’s Office for the Southern District of New York. In that position he prosecuted and tried cases involving accounting fraud, mail and wire fraud, and insider trading. Alex also served as a Branch Chief in the SEC’s Enforcement Division, where he conducted numerous high-profile investigations into securities law violations, including cases stemming from the collapse of Enron.

In private practice,  Alex has successfully represented numerous individuals and entities in high-profile white collar securities cases, including cross-border investigations and international prosecutions.

Mr. Lipman also has been a key driving force in developing a proprietary Grey2White® Due Diligence Program designed to identify and solve complex legacy due diligence issues, as well as to optimize multiparty compliance inquiries, which arise during international financing transactions.

“We are very excited to have Mr. Lipman and his Firm advise our team. As the Broad Street Capital Group is poised to enter its next phase of growth, having a seasoned, internationally renowned legal expert in our corner, will help the firm’s clients not only to successfully navigate through complexities of international financing and M&A transactions, but will also allow them to unlock the value of their companies by putting in place best practices in the areas of financial reporting, anti corruption and corporate governance.” said Alexander Gordin, Managing Director of the Broad Street Capital Group.

“I look forward to working with Mr. Gordin and the Broad Street team on ways to improve and streamline the way due diligence and compliance are managed during international financing and merger transactions involving companies in emerging markets. Rather than engaging in a reactive, expensive and cumbersome process, the Grey2White® program aims to provide deeper due diligence investigations than conventional KYC screenings in advance of potential transaction. This would provide greater transparency from the start, reduce costs and benefit all parties involved in the transaction.” said Alex Lipman

About the Broad Street Capital Group.

Based in the heart of New York City’s Financial District, Broad Street Capital Group (www.broadstreetcap.com) is an international private merchant bank, which since 1988 has served several foreign governments, multiple state-owned companies, as well as SMEs in emerging markets. Through its member companies, the Group focuses on developing project financing in the $100 million to $1 billion range, providing political risk mitigation, export management services and cross-border market development advisory. The Firm has done business in over 35 countries, spanning the emerging markets landscape from Bangladesh to Ukraine.

Currently, the Firm maintains presences in30broad eight countries and works closely with all trade and development agencies of the U.S. Government, as well as with Credit Agencies of several European and North American countries. Since its inception, Broad Street Capital Group has been involved in multiple high-profile cross-border transactions in agriculture IT/telecom, aerospace, healthcare, oil and gas,energy generation, food security, nuclear safety, hospitality and franchising sectors. The firm’s current advisory and financing portfolio is expected to exceed $1.25 billion by January 1st, 2020.

 

Driving through the rain towards brighter economic future of Ukraine

About a month ago, during a Washington round-table on Ukraine hosted by the US-Ukraine Business Council (USUBC), someone asked me what do my colleagues and I expect from the new President of Ukraine and his administration? My answer, which was picked up by the Voice  of America and other publications, was essentially – I have no idea. But since we have been and continue to be bullish on the Ukraine for almost twenty five years, our strategy is to move forward despite the political climates, as we always hope for sunny investment weather, but carry a sturdy umbrella in case it starts to rain.  IMG-1cae7e700ec217303b52f13cd14e1c96-V

Well, it is raining now.  Raining hard and much sooner than expected.

The events of this passed week have created a vicious firestorm with  “Ukraine” being mentioned practically non-stop.  In this post I will not address the politics of the situation, as this has been done by practically every major media outlet in the world ad nauseam. My focus will be on business opportunities and financing tools available to those wishing to invest into the Ukrainian economy, as despite this week’s “torrential downpour” nothing has fundamentally changed to make Ukraine a less attractive place to invest.

First, some basic assumptions under which we have been operating in Ukraine for almost quarter of the century:

  • Massive institutionalized corruption exists in Ukraine and it will probably take two-three generations for it to be rooted out;
  • Ukraine is a very risky place to do business;
  • Many people who accumulated capital in the ’90’s played by the “fast and loose rules” and cut multiple corners;
  • As business in the country evolves, most astute business people understand that by playing by the transparent and well-defined rules set out by the western markets they can unlock the value of their holdings, obtain access to low-cost financing and protect their assets for the generational asset transfer;
  • Ukraine has fantastic potential for economic growth in multiple sectors;
  • Terrific opportunities exist for US, Canadian and European companies to supply goods and services to Ukraine and to bring world-class Ukrainian goods into the Western markets;
  • Ukraine has a superb pool of smart and educated labor force;
  • Country is of a strategic geopolitical importance and will always be a subject of political pressure and outside influence;

Given the above, it is important to take a long view and not be terribly concerned with current politics, because by definition Presidents, Ministers, Ambassadors and Senators change every few years. Once such long-term philosophy is accepted, then it is necessary to construct one’s proverbial umbrella. Namely, risk mitigation, corruption resistant mechanisms must be incorporated into one’s approach to doing business in the country.  What this means in practice is the following:

  • Targeting for investment and financing primarily those sectors where corruption is either low or  non-existent. From our standpoint exports of Ukrainian natural foodstuffs, renewable energy, electro-transport production, IT, nuclear waste containment are some of those.
  • Utilizing US Government financing tools, such as those offered by OPIC and US-EXIM  Having these tools part of a business transaction not only provides low-cost, long-term financing, which improves economics of practically any project, but having government-backed financing in a deal, also improves quality of due diligence and acts as fantastic corruption deterrent and protection for investors.
  • Obtaining political risk, trade credit, or breach of contract insurance for every significant deal or trade transaction. US  Government and certain well-rated global  insurance companies offer protection to investors from such perils as expropriation, creeping expropriation, currency  inconvertibility, non-payment for goods supplied, or services rendered and for breach of contract.  Such insurance is not terribly expensive, but  de rigueur for anyone looking to invest into the Ukraine, or into any  foreign market, for that matter.
  • Creation of a so-called Grey2White® program to allow investment where original capital, or business formation had murky roots, but can be fully re-mediated with application of strict compliance procedures, financial restructuring and accounting oversight.20160523_094104
  • Finally, despite of the current rainy weather, we are moving hard to add one more extremely effective tool, which has been missing in Ukraine’s economic development. Creating a safe umbrella for individual American-Ukrainian, Canadian-Ukrainian and members of Ukrainian diasporas in other countries to invest into the future of Ukraine.

What this means is a focused investment platform listed on a stock exchange and subject to a recognized US, or Canadian authority such as Securities Exchange Commission (USA), or Canadian Securities Administration (CSA). Such platform would will further be secured by protection of the political risk insurance and will, for the first time since Ukraine’s independence, allow individual investors with as little as $500! to invest,  to participate in Ukraine’s economic development, while having the umbrella of protection of the western laws, rules and regulations.  We call this platform “Develop UA”™ and expect to formally roll it out to the world in the middle of October, 2019 regardless of whether it is raining, or sunshine in Kyiv and Washington, DC.

relevant links

http://www.usubc.org/site/recent-news/doing-business-in-ukraine-now–usubc-roundtable-in-washington

https://ukrainian.voanews.com/a/amerykanksy-biznes-ukrayina/5051657.html

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World Affairs Councils of America Welcomes Broad Street Capital Group as National Affiliate Member and Sponsor

Washington, DC, May 14, 2019 — The World Affairs Councils of America (WACA) is pleased to announce that Broad Street Capital Group (www.broadstreetcap.com) has joined WACA as a National Affiliate Member, sponsor of the WACA National Conference, and member of its prestigious 1918 Society.

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Broad Street’s expertise in advising on foreign direct investment (FDI) strategies in emerging and frontier market countries and WACA’s ability to convene foreign government leaders and influential audiences through its extensive network of more than 90 World Affairs Councils across the United States will provide a powerful platform for U.S. companies targeting investment opportunities and seeking policy and regulatory knowledge in these markets.

Broad Street will tap the WACA platform to conduct a national tour to educate potential U.S. investors on available U.S. Government financing options, as well as political and trade risk mitigation tools. WACA will assist Broad Street in organizing bilateral trade missions and curated foreign policy tours to highlight economic advantages of the target markets and to facilitate trade and investment opportunities.

“It is an honor and a privilege to become WACA’s newest National Member,” said Alexander Gordin, co-founder and Managing Director of the Broad Street Capital Group.  “My colleagues and I look forward to helping this prestigious 100-year old national organization to grow into the next century of its existence.  Foreign direct investment is an essential  part of sound foreign policy for any nation and having such an esteemed partnership with the WACA network’s convening power on this issue, would definitely bring significant measurable results.”

“WACA is delighted to collaborate with Broad Street and we look forward to inviting leading investors and representatives of foreign investment agencies as guests of the Broad Street Capital Group at WACA’s 2019 National Conference in Washington, DC,” said Bill Clifford, President and CEO of the World Affairs Councils of America.

Scheduled for November 6-8 at the Mayflower Hotel in DC, the WACA Conference will feature more than 50 leaders and policy experts on the theme: “The 8 Forces Reshaping the Global Economy.”

About the Broad Street Capital Group

Based in the heart of New York City’s Financial District, Broad Street Capital Group (www.broadstreetcapital.com) is an international private merchant bank, which since 1988 has served several foreign governments, multiple state-owned companies, as well as SMEs in emerging markets. Through its member companies, the Group focuses on developing project financing in the $100 million to $1 billion range, providing political risk mitigation, export management services and cross-border market development advisory. The Firm maintains a permanent presence in London, Budapest, Kyiv, Tashkent, and  Astana, .  Since its founding, Broad Street Capital Group has done business in over 35 countries, spanning the emerging markets landscape from Bangladesh to Ukraine.

The Firm works closely with all trade and development agencies of the U.S. Government and Export Credit Agencies of several European and North American countries. Since its inception, Broad Street Capital Group has been involved in multiple high-profile cross-border transactions in IT/telecom, aerospace, health care, energy generation, food security, nuclear safety, hospitality and franchising sectors. The firm’s current advisory and export management portfolio exceeds $900 million.

About the World Affairs Councils of America

The World Affairs Councils of America (www.worldaffairscouncils.org) is an independent, nonpartisan organization dedicated to engaging the public and leading global voices to better understand the world, America’s international role, and the policy choices that impact our daily lives and our future. WACA carries out its mission by:

  • Supporting more than 90 World Affairs Councils across the United States and promoting programs and educational initiatives for diverse local audiences – from classrooms to C-suites, from town-hall style community forums to conferences in the nation’s capital.
  • Developing Councils’ convening power nationwide by providing face-to-face connections and dialogue with global leaders, business executives, policy and trade experts, ​social innovators, and distinguished opinion makers.
  • Partnering with organizations that seek to reach out to “grassroots” and “grasstops” citizens, disseminate research, mutually expand networks and transform how people, enterprises, and governments think about the world.
  • Challenging the next generation to develop leadership skills and global acumen so that our communities can better compete, collaborate, and make informed decisions.

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