Baltic States – CIS, EU – Baltic States, Financial Services, Latvia, Legislation, Markets and Companies, Metals Market

TV3 commercial television reported previously that Ukraine’s KVV Group, which had bought the insolvent Latvian steel maker Liepajas Metalurgs, intended to file with the London Court of International Arbitration (LCIA) a EUR 50 million claim against Latvia as they believed that certain information had been kept from them at the time the deal was made.

Neither the Finance Ministry nor the Treasury had any information about the Ukrainians having actually filed a claim with the LCIA. "We believe such claim would be unsubstantiated because the state strictly abided by all the terms of the agreement with KVV Liepajas Metalurgs,” Jarockis said.

He said the steel maker’s troubles stemmed from a number of factors, including the complicated situation in the global metallurgy market, but the new owners of KVV Liepajas Metalurgs lacked a feasible plan for business growth in such circumstances. Moreover, the Ukrainians were unfamiliar with the business practices in the EU and restrictions to the direct state aid to companies.

As reported, Latvian Economics Minister Arvils Aseradens (Unity) said that KVV Liepajas Metalurgs was showing signs of insolvency. FeLM, a company established by the Latvian Privatization Agency for dealing with KVV Metalurgs’ issues, had talked to the company’s management about restructuring of the steel plant but the talks had turned out to be unproductive.

Ukraine's KVV Group announced in late March it had been forced to take a decision on the conservation of KVV Liepajas Metalurgs steel plant because the negative factors hampering the company's operations – the crisis in the global metal industry, the company's debts to secured creditors and the Latvian government's reluctance to provide assistance to the industry – were persisting.

Liepajas Metalurgs metallurgical plant based in the Liepaja port city in south-western Latvia was declared insolvent after it failed to repay a state-guaranteed loan to an Italian bank. The government sold the plant to Ukrainian investors, KVV Group, in late 2014. Liepajas Metalurgs was renamed KVV Liepajas Metalurgs and officially re-opened on March 6, 2015, but soon started having problems again. The company has had difficulties paying its electricity bills and wages to workers. It has also missed the deadline for a EUR 2.7 million payment to the Latvian state, an installment for purchase of the steel plant.

Ukraine’s KVV Group is supposed to pay for the plant EUR 107 million in several installments over the next 10 years.