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

The management chose to keep the plant running in February, although it was aware that the decision would mean losses to the company, said Igor Talanov, the board member of KVV Liepajas Metalurgs. He said the company had followed all instructions from the Latvian government and submitted the restructuring plan to the Treasury on March 1.

Despite the difficult situation, KVV Liepajas Metalurgs continues to hope for support from the creditors.

KVV Group hopes that the Treasury would submit to the Latvian government its opinion about the restructuring plan by the planned deadline on March 15 and that the Treasury’s conclusions would be well-considered.

"We are prepared to provide any additional information about the company but it is vital to begin a dialogue,” Talanov said.

As reported, Ukraine's KVV Group is evaluating the possibility of suspending the operations KVV Liepajas Metalurgs and preserving the factory if the Latvian Cabinet of Ministers did not make any constructive decisions during its March 15 meeting.

The management of KVV Group believes that in a situation in which KVV Liepajas Metalurgs has been forced to work in a business environment for quite a while in which the state has just a formal attitude towards the company's objective problems and a constructive dialogue has been constantly been put on hold, the company could be forced make the decision to preserve the Liepaja factory.

On March 1 KVV Liepajas Metalurgs submitted to the Treasury a restructuring plan as requested to do so by the Latvian government at the beginning of February. The plan contains proposals for a new timetable for paying a EUR 70 million debt and sale of non-core assets. Proceeds from sale of non-core assets will be used for modernization of the plant and payment of the debt.

Latvian Finance Minister Dana Reizniece-Ozola (Greens/Farmers) has already criticized the restructuring plan, saying that, instead of taking into account the interests of the state or the company's long-term strategy, the plan was based on the interests of the current shareholders. ”This is not a good signal for the future operation of the company,'' she said.

Liepajas Metalurgs metallurgical plant based in the Liepaja port city in south-western Latvia halted production in spring 2013 and was unable to repay a state-guaranteed loan that it had taken from the Italian bank UniCredit. In July 2013 the Treasury paid off the entire loan or EUR 67.465 million from the state budget.

Liepajas Metalurgs was declared insolvent and later sold to Ukrainian investors, KVV Group. Liepajas Metalurgs was renamed KVV Liepajas Metalurgs and officially re-opened on March 6, 2015, but soon started having problems again. In late December, 2015, it missed a payment of EUR 2.7 million to the Treasury, one of the installments to be paid to the Latvian government over the next 10 years, and asked the government for a two-year extension of the payment deadline.