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Privatization Agency: investors interested in KVV Liepajas Metalurgs assets

BC, Riga, 24.05.2016.Print version
With the situation in the metal industry gradually improving, some potential investors have started showing interest in the assets of Latvia's struggling metallurgical company KVV Liepajas Metalurgs, Vladimirs Loginovs, board chairman of the Privatization Agency (PA), said on Latvian Radio today, cites LETA.

The PA head indicated that the agency is not looking for new investors for the financially troubled company because it already has an owner, but some businesspeople have been showing interest in KVV Liepajas Metalurgs assets at their own initiative.

 

If the Ukrainian owners of KVV Liepajas Metalurgs do not take action, the company's insolvency is imminent, Loginovs said. At present, filing for insolvency is up to the creditors, because the company's debt has grown big enough already. As a secured creditor, the Latvian government cannot lodge the insolvency claim, but the claim can be filed by the company's employees and suppliers.

 

If the insolvency procedure is initiated, it will be up to the insolvency administrator to take further decisions on selling off the company's assets. The administrator, however, will have to coordinate his decisions with the creditors, Loginovs said.

 

As far as Latvia's interests are concerned, it would be better to regard the steelworks as an integrated unit and not divide it in separate parts. It would therefore be necessary to look for an investor who could preserve KVV Liepajas Metalurgs as an undivided enterprise, Loginovs said, adding that it is quite possible that such an investor will be found, considering the current interest in the company.

 

The company's current owner, Ukraine's KVV Group, has strictly said that they are not going to make any more investments in KVV Liepajas Metalurgs, but without additional funding the plant is unlikely to resume production, Loginovs said. Although KVV Group has submitted restructuring proposals, most of them, such as tax rebates and special electricity prices, are not implementable.

 

The KVV Liepajas Metalurgs plant in the southwestern Latvian city of Liepaja is currently idle-standing and is being conserved. The company's assets are safe.

 

Loginovs said that the government will not recover all the money injected in KVV Liepajas Metalurgs, but the size of the expected loss is not yet clear, as it will depend what happens with the industry. If the market comes to life again, the assets can be very valuable.

 

The government today is scheduled to address the situation in KVV Liepajas Metalurgs. According to the government meeting's agenda, the Economics Ministry and PA are expected to report to ministers on a claim that is being readied against KVV Liepajas Metalurgs.


As reported, Latvian Economics Minister Arvils Aseradens (Unity) said last week 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 KVVLiepajas 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.

 

If KVV Group, the investor in the metallurgical company KVV Liepajas Metalurgs, takes the state of Latvia to court, the possibility that Latvia could lose the case is very minimal, as the Privatization Agency's head Vladimirs Loginovs told the Latvian Radio.

 

KVV Group acquired KVV Liepajas Metalurgs from the insolvency administrator, not from the state of Latvia. Therefore there are no grounds for KVV Group's lawsuit, and the risk that Latvia could lose such a lawsuit is low, said Loginovs. He added that the risks associated with this development were being evaluated by the State Chancellery.

 

TV3 reported that KVV Group, which bought the insolvent steel maker Liepajas Metalurgs at the end of 2014, was planning to file with the London Court of International Arbitration 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.

 

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.






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