Troubled steelworks sue insolvency administrator

Sparks fly between the troubled Liepāja steelworks and its insolvency administrator as the management of KVV Liepājas metalurgs has gone to court against administrator Haralds Velmers, who immediately countersued, reported Latvian Television Thursday. Later Thursday BNS reported that the Liepāja court has received a request to declare the steelworks insolvent, to be reviewed on December 29. 

The court action between Velmers and KVV Liepājas Metalurgs is related to payments for more than €0.5m, which the company decided against making. The company declined comment.

"I can confirm that I turned to court against KVV Liepājas metalurgs as they sued me as the administrator. As I understand it there shouldn't have been such misunderstandings as it's related to obligations that KVV Liepājas metalurgs undertook upon signing the purchase agreement," Velmers told Latvian Television.

According to him, the contested point in the agreement stipulates that the new owners of the steelworks agreed to cover the insolvent company's expenses from December 2014 until the transfer was undertaken. 

The unpaid expenses add up to €550,000, including wages as well as electricity and gas bill costs accrued during this period.

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. 

On October 2, 2014 the steelworks were sold to Ukrainian KVV Group. At one point the company employed 960 people. The company cut down production on May, citing high cost of electricity, in particular the large amounts payable for the mandatory purchase component (MPC or a component of the electricity price supporting production of renewable energy). This left some 600 workers in the company, where only 400 work now. 

On Wednesday Liepāja mayor Uldis Sesks announced that starting next week the steelworks are halting operations until January 10 due to maintenance and holidays. 

UPDATE: Later Thursday BNS announced that Elme Messer Metalurgs had filed an insolvency request for the troubled steelworks on December 16. 

The insolvency request by Elme Messer Metalurgs will be reviewed by Liepāja court on December 29. Elme Messer Metalurgs, owned by Estonian Elme Messer Gaas, supplies KVV Liepājas Metalurgs with industrial-grade oxygen.

Elme Messer Metalurgs board member Silvis Fridrihsons denied knowledge about the insolvency request and said he'd offer more comment Friday upon his return to Latvia. 

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