Employment, Financial Services, Latvia, Legislation, Markets and Companies, Metals Market

"In August last year we, employees of KVV Liepajas Metalurgs, received with great hopes the news that the Latvian government understands the tight situation in the company and will come up with proposals on how to support the largest metallurgical enterprise in the Baltic states so that it could cope with the crisis and resume normal operations. Half a year has passed since then already, but no solutions have been found. Moreover, it turns out that the government is not ready to show cooperativeness and find a compromise solution. The employees are overwhelmed by uncertainty, concerns and worries about the company's fate," the authors of the letter say.

According to the letter, the KVV Liepajas Metalurgs employees are aware of the deep crisis that has hit the metallurgical industry in Europe and elsewhere in the world and that it became even worse in the second half of 2015. "In this disastrous situation, governments of many countries had to decide on providing support to local businesses, and information at our disposal suggests that solutions are being found. First of all we mean electricity prices. KVV Liepajas Metalurgs cannot compete even in the local Latvian market which is being flooded with low-quality products from Belarus," the KVV Liepajas Metalurgs employees say in the letter.

The steel company's employees say that government support would not be needed in the long run, but that it is hard to imagine how KVV Liepajas Metalurgs might cope with its current difficulties without the government's aid.

The mood in the company is uptight and there is uncertainty and worries about the future, the employees say. "The company's employees are therefore asking the government to provide concrete answers about possible support as soon as possible. This would provide clarity about our place and role in the company and allow us to make our professional plans, which in the worst case scenario might not be associated with Liepaja and Latvia anymore."

The Latvian government is uncooperative and would not make any concessions to KVV Liepajas Metalurgs (KVV) steel plant to help the company recover from a crisis, KVV representatives said last week.

"KVV believes that the creditors and the government have adopted an ultimatum stance. KVV feels that the government is unwilling to meet it halfway to help the company to recover from a crisis,” the steel company’s representatives said.

Under the debt repayment agreement signed between KVV Liepajas Metalurgs and the Finance Ministry in 2014, the steel plant was due to make a payment of 2.7 million euros to the Treasury on December 28, 2015, but has asked the government for a two-year extension of the payment deadline.

KVV asked the Latvian government for a two-year extension on the payment of 2.7 million euros which the company was due to make in late December 2015. The government said it could agree to extend the payment deadline on certain conditions, including assurances from the Ukrainian owners about financial investments in the steel plant and a bank guarantee for the overdue payment of 2.7 million euros valid until January 31, 2017.

On January 19 the Treasury said that KVV had satisfied the above conditions only partly, namely, the steel plant had not provided a full guarantee for the overdue payment. It means that an agreement on the restructuring of their debt has not been reached, the Treasury spokespeople said.

The production plant of the insolvent Liepajas Metalurgs based in the Liepaja port city in southern Latvia was sold to Ukraine’s KVV Group on October 2, 2014.

KVV is to keep making payments the Finance Ministry for 10 years. Considering the down payment received from Ukrainian investors when they bought the insolvent Latvian steel company, the annual installment for 2015 has been calculated at 2.7 million euros but in the coming years the company will have to pay 7.5 million euros annually.

On November 12, 2013, the court declared Liepajas Metalurgs insolvent. The company ran into financial troubles and had to cease production in spring 2013 due to a shortage of working capital. Liepajas Metalurgs could not repay a state-guaranteed loan it had taken from an Italian bank, and the loan was repaid by the Latvian state. Liepajas Metalurgs was placed under legal protection but all negotiations about rescuing the company and bringing in a new investor failed and the company’s administrator filed for insolvency.