Financial Services, Industry, Latvia

International Internet Magazine. Baltic States news & analytics Wednesday, 20.11.2019, 22:47

Riga bourse to suspend trading in Valmieras Stikla Skiedra shares

BC, Riga, 17.06.2019.Print version
The Nasdaq Riga stock exchange will today suspend trading in Valmieras Stikla Skiedra fiberglass producer’s shares, the stock exchange said in a statement.

The board of the Riga bourse took decisions after Valmieras Stikla Skiedra asked the stock exchange to suspend trading in its shares as the company was going to disclose price sensitive information on Monday.

The decision to resume trading will be announced separately, the stock exchange said.

As reported, Valmieras Stikla Skiedra has filed for legal protection proceedings with the Vidzeme District Court in Valmiera.

The company’s representatives said that in May 2019, a due diligence was started at P-D Valmiera Glass USA Corp., the majority-owned US subsidiary of Valmieras Stikla Skiedra. However, despite subsequent discussions with the potential investor, no binding proposal was made.

In the meantime, an additional unrelated third party has also registered their interest in the overall US assets (both Phase 1 and Phase 2 operations). No firm proposal has been received thus far from them.

“Investments totaling more than EUR 80 million have been made into the US Phase 2 facility thus far (with a total of USD 110m planned for the period 2014 – 2022). Unfortunately, within the process of carrying out this project a number of unforeseen obstacles have arisen. The consequences of these, despite multiple innovative approaches by management have not been fully eliminated to this day. Due to these reasons the Phase 2 facility (the vertically-integrated fiberglass yarn producing operation) production line is still not able to work at full capacity and is operationally loss-making, effectively consuming operational cash from other parts of the Company,” Valmieras Stikla Skiedra said.

The company’s management also notes that in order to raise financing for the establishment of the US Facility and the Phase 2 operations, the US facility entered into an uncommitted revolving credit line agreement with a US-based bank. In order to secure the implementation of debt liabilities deriving from the Credit line Agreement, the Company issued a guarantee for the benefit of the US-based bank. Since the US facility failed to meet the obligations deriving from the Credit line Agreement, the bank, on the basis of surety liabilities established beforehand, has requested the Company to immediately repay the loan together with interest accrued in the amount of USD 3,013,148 on June 10, 2019. There are no possibilities for the Company to repay the guaranteed loan immediately.

Moreover, the Company has substantial debt liabilities in the amount of at least EUR 67,014,370 and at least USD 17,836,071 towards two other banks. The claim of the US-based bank puts the Company in cross default in respect of the loan agreements with the two other banks.

As a result of the circumstances indicated above the Company has entered into a stage of financial difficulty. In order to continue sustainable operations and to ensure for the possibility of reaching a sustainably-workable agreement with its creditors, the Company needs to ensure unhindered and continuous operation of its key production lines and gain time to reach agreement with its creditors on the procedure to meet liabilities of all creditors, Valmieras Stikla Skiedra representatives admit.

Successful future development of the Company remains a clear goal of the Management and Supervisory Boards. Therefore, in the present circumstances the most appropriate solution is the filing an application for initiation of legal protection proceedings (LPP).

“Therefore, having performed a thorough analysis of the situation and having consulted with the Company’s Supervisory Board, auditors and lawyers, the Management Board of the Company decided to take this measure and submit to the Vidzeme District Court the request to initiate LPP status of the Company,” the management says in the statement.

The operations of the Company in Latvia and its subsidiary in the UK have consistently generated strong cash flows and profitability through recent years. In parallel they have effectively supported the expansion of the Company into the US.

The Company has been experiencing healthy demand for its various products and the completion of such orders will ensure the cash flow necessary to the Company to engineer a restructuring of its financial liabilities without the burden of supporting the Phase 2 US operations in the short to medium term.

In the meantime, the Management Board is continuously ensuring professional communication with its creditors. After receiving the court’s decision on initiation of the LPP, the task of the Management Board of the Company will be to develop and submit to the Company’s creditors for approval the recovery plan of the Company in accordance with the requirements of Latvian law. It is envisaged that this would require reorganization of the US facility activities, as well as optimization of the cash flow and strengthening the balance sheet of the Company.

The Company informs that no decision in respect of the sale of the Phase 2 operations of the US facility has been taken and the management of the US facility continues negotiations with potential investors to potentially acquire its Phase 2 facility. In parallel it cannot be ruled out that a thorough restructuring of the Phase 2 operations (with both existing and future potential stakeholders) will in time enable a successful operation of the facility.

As reported, Valmieras Stikla Skiedra fiberglass maker turned over EUR 112.983 mln in 2018, down 10.25 from 2017, and sustained a loss of EUR 14.991 mln in contrast to a profit made the year before.

Valmieras Stikla Skiedra group comprises the parent company Valmieras Stikla Skiedra and its three subsidiaries: Valmiera Glass UK Ltd. in the United Kingdom, Valmiera Glass USA Corp. and Valmiera Glass USA Trading Corp. in the United States. Valmieras Stikla Skiedra shares are quoted on the Secondary List of the Nasdaq Riga stock exchange.

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