Банкеръ Weekly



The large-scale campaign against the Kremikovtsi iron and steel works has become quite obvious recently. Not that it has not been deserved. It's strange why now, after nine years of patience to the unfulfilled privatisation commitments, unpaid bills, unrealized promises for investments, unfair attitude towards workers and other employees, the State's monopolists and agencies, the Minister of Economy and Energy Peter Dimitrov, and the Premier Sergey Stanishev have decided to wake up.
The Sofia City Court has also taken up Kremikovtsi's case. On February 20 minister Dimitrov announced that the privatiser Finmetals Holding has been sentenced to pay BGN239.25MN in default for nonfulfilment of the divestment agreement in its part about investments. The claim has been filed by the Post-privatisation Control Agency. Finmetals Holding appealed the Sofia City Court's ruling, but it was not considered at all. The term for secondary appeal has elapsed, too, so the sentence has already entered into effect, the minister explained. In fact, several more lawsuits had been instituted for unpaid defaults on the part of Finmetals in the 2003 -2005 period but not a single one of them was considered at first instance until a month ago. The defaults of Kremikovtsi's owner amount to USD260MN. Due to them back in 2004 the Post-privatisation Control Agency laid a distraint on Finmetals' 71-percent stake in the enterprise.
There are two possible ways from now on if Finmetals does not pay the default. One of them is to draft a writ of execution, and the other - to invalidate the divestment contract. Not a single contract has been revoked by the agency so far if such a sanction has not been explicitly stipulated in it. However, this contract can be invalidated only after the Council of Ministers' approval because it was closed with its blessing. Finmetals Holding bought from the State the 71% package of Kremikovtsi's capital in June 1999 at a token price of USD1.
Just a day before the Sofia City Court's ruling became known, Finmetals Holding's owner Pramod Mittal addressed a letter to PM Sergey Stanishev, minister Peter Dimitrov and other Government representatives, asking the State to permit the enterprise to pay only its current liabilities to the state-run companies BDZ, NEC and Bulgargas over the coming 90 days. During that period Mittal committed himself to find a strategic partner who would allow the settlement of the plant's previous liabilities in a short term. Last year the company paid off over BGN267MN current and previous debts to NEC, BDZ and Bulgargas. In the letter, Mittal adds that raw material has been provided for the plant to operate in the next 90 days which would result in the production of about 100,000 tons of steel. He writes that if the deferral is not approved, the situation would become quite negative for the enterprise as well as for all parties interested in the company's operations. The economic minister, Peter Dimitrov, commented the letter by saying Mittal had signed a statement that EUR100MN would be put in the plant in 2007 and this had not happened in fact. This is why the ministry would not consider his request now.
Kremikovtsi has a capital amounting to BGN8.5MN. As its unfunded financial report for the last quarter of 2007 shows, its long-term commercial and other liabilities amount to BGN845.607MN, compared to BGN796.886MN a year earlier. Its short-term debts amount to BGN721.938MN, compared to BGN632.308MN in 2006. The company's total operating costs reach BGN1.7BN. Kremikovtsi ended 2007 at a loss amounting to BGN35.930MN, compared to BGN280.792MN in 2006. However, the main reason for the drop in the loss is the sale of assets. Total operating revenues amount to BGN1.6BN, of which BGN418.2MN result from miscellaneous sales as reported in the profit and loss account (compared to BGN23.631MN in 2006).

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