Банкеръ Weekly



The case concerning Kremikovtzi's liabilities to the State and to the state-owned companies was stirred again, this time by trade-union commotions about the tough financial situation of the Bulgarian State Railways (BDZ). The Minister of Transport and Telecommunications Plamen Petrov tried to convince BDZ workers that the bulk of their problems lies in the Sofia-based iron and steel works. Mr. Petrov announced his intention to take strict measures and collect all receivables from Kremikovtzi AD. There were even rumours that a compulsory collection of BDZ's receivables was possible after declaring Kremikovtzi insolvent. Such measure, however, can only add to Minister Petrov's image, but can hardly do away with the carrier's financial difficulties. Only a few weeks ago the Parliament wrote off BDZ's liabilities to the State amounting to BGN128MN, transforming them into extra capital. Meanwhile, it was revealed that the company had lost 12% of its cargo for only one year. So it is very doubtful whether Kremikovtzi's debt of BGN10MN might bring the railroads up and kicking again.In case Kremikovtzi is liquidated, this will deprive BDZ of one of its biggest clients. According to Nikola Yankov, Deputy Minister of Economy and head of the special coordination commission to settle the relationships between Kremikovtzi AD and its state-owned creditors, the plant provides 27% of the cargo to be trasported by the railroad company. Let alone the fact that an eventual liquidation will also steal the major client of the ports of Bourgas and Lom. It is very important that Kremikovtzi keeps on working, said Nikola Yankov to the BANKER weekly. It is much better to seek smooth recovery without any abrupt moves like liquidation or cancellation of the privatization agreement. Obviously, the Government has no intention to play against Kremikovtzi's present majority owner Finmetals Holding AD and will count on its good will.The pressure between the incumbent Government and the iron and steel works emerged at beginning of February when the Ministry of Finance ordered that the Port of Bourgas should stop serving the company's cargo for the reason of accumulated VAT liabilities. Tax collectability was then said to be insufficient and governors were attempting improvement in any possible way. It seemed the easiest to place the biggest tax payers in the corner. Now Plamen Petrov attempts quite a similar move. He blames BDZ's problems entirely on Kremikovtzi and not on bad management for example. After all, BDZ reported USD140MN loss for 2001.In fact the iron and steel works is a perfect target for attacks of any kind. Kremikovtzi is far from being an ideal debtor. Deputy Premier and Minister of Economy Nikolay Vassilev announced to the Parliament that the company was being drained from offshore firms. And the Ministry of Transport and BDZ in particular are hardly capable of taking such crucial decision as Kremikovtzi's bankruptcy alone. This will practically make pointless the activiy of Nikola Yankov's commission which also includes the Deputy Minister of Finance Gatti Al-Djeburi, Deputy Energy Minister Angel Dinev, and Deputy Transport Minister Zlatolina Mukova. This group is supposed to work out a plan with Kremikovtzi's management, concerning payment of its liabilities to the National Insurance Institute, the Chief Taxation Directorate, the Customs Agency, Bulgargas, the National Electricity Company (NEC), BDZ and the Port of Lom, amouting to over BGN250MN. Valentin Zahariev claims that Finmetals Holding has inherited over BGN300MN of hidden liabilities which have not been included in Kremikovtzi's accounting reports submitted at its privatisation.As for BDZ, Kremikovtzi's press service informed that since Monday (May 13) daily payments of EUR100,000 had been started, which rounds paid-up liabilities to over EUR1MN. The rest of the sum is still under negotiation. Nikola Yankov informed the BANKER weekly about the State's offer that its representatives would enter Kremikovtzi's managerial team at the June 28 general meeting. So the Ministry of Economy, which holds over 25% of the company's shares, will insist not only on placing its people as members of the Supervision and Management Boards of the enterprise, but also on having its own executive director.

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