Insolvency claim filed against troubled steelworks

The walls appeared to be closing in around debt-laden KVV Liepajas Metalurgs steelworks Monday when one of its frustrated creditors filed a claim against the company that could see it declared insolvent.

An insolvency claim was filed June 17 against  KVV Liepajas Metalurgs metallurgical company with the court in Liepaja, south-western Latvia, according to the information published on the website of the Insolvency Administration.

The insolvency claim had been filed by G4S Latvia security company.

The court will hear the insolvency claim against KVV Liepajas Metalurgs at 10 a.m. on July 1, LETA was told at the Liepaja court.

The Latvian government on May 17 and May 24 reviewed a report prepared by the Latvian Privatization Agency (LPA) and FeLM, a company established by the LPA to which the State Treasury will assign its claim against KVV Liepajas Metalurgs, in cooperation with the economics and finance ministries.

It concluded that the debt restructuring proposals by KVV Group, the Ukrainian owners of KVV Liepajas Metalurgs, are unacceptable and other solutions have to be found for revival of the steel plant.

The proposals by KVV Group include significant participation of the Latvian state in the metallurgical company without handing over control over the company, tax discounts and other measures that would probably be classed unlawful state aid under European Union rules.

Ukraine's KVV Group announced in late March it was mothballing the 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 previously declared insolvent after it failed to repay a state-guaranteed loan to an Italian bank. The government sold the plant to little-known Ukrainian investors, KVV Group, a firm of scrap metal dealers, 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 €2.7 million payment to the Latvian state, as part of the extremely favorable conditions under which it acquired the plant.

Ukraine’s KVV Group is supposed to pay for the plant €107 million in several installments over the next 10 years, a payment plan which looks unlikely to be fulfilled, to say the least.

 

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