bnn.lv Latviski   bnn-news.com English   bnn-news.ru По-русски
Wednesday 20.09.2017 | Name days: Marianna, Ginters, Guntra
LatviaLatvia

Liepājas metalurgs comes close to becoming the next Parex disaster

FaceBook
Twitter
Draugiem
print
(No Ratings Yet)

Einars Repse

Einars Repse

Latvia’s industrial giant Liepājas metalurgs (LM) could become the next Parex collapse story. The moment for Latvian politicians to make their final decision draws ever closer every day, Nekā personīga (Nothing personal) programme of TV3 reports.

One of the first preconditions for this is known already – if the state provides the money, the entire Board of LM will be removed as no longer trusted. There is not much time left to act – the first payment of more than 5 million LVL to the Italian UniCredit Bank needs to be paid on LM’s behalf on April 30.

Talks about the fate of LM were going on in Latvia and abroad throughout the entirety of last week. Representatives of LM owners, State Treasury and creditors had departed for Italy at the beginning of the week. Their goal was to knock on UniCredit‘s doors with a request to put off this month’s expected credit payment, which LM cannot afford at the moment.

However, the trip was fruitless. UniCredit refused to change the conditions of the credit without first seeing a clear business-plan of LM. This is why Italians decided to go the easy road – request the payment of the credit from the state of Latvia as a guarantee of LM.

The situation unravelled further at the Economy Ministry. Conflicting shareholders of LM had gathered at the institution. The two sides had agreed on one thing – there is still no investor, all other options are unacceptable. Kirov Lipmans said he is ashamed to have to turn to the state in order to save Sergei Zakharin’s and Ilya Segal’s private business.

“If they led LM to this situation, they should put their owned shares on the table and leave! That is all!”, – Lipmans said, promising to save LM without help from the state.

Zakharin, on the other hand, does not intend to leave. “We, Mr Segals and me, are prepared to hypothecate our shares (71%) for additional credit funds or other investments in order to help LM”, – Zalharin said.

Finance Minister Andris Vilks had previously noted the shareholders’ property is estimated at hundreds of millions. This means this property can be invested in LM. But Zakharin is reluctant to speak of this option and continues to say that he has no money to invest.

In spite of the fact that he told the programme that he is prepared to sell some of his property to help LM, he said no such thing during the meeting at the Economy Ministry. Lipman’s proposal, on the other hand, is judicially impossible, because the state has no rights to simply take shares away from one of the conflicting shareholder sides and hand them over to the other.

If there is no result in the near foreseeable future, the state will need to decide: whether to pay the remaining amount of 51 million LVL on behalf of LM and allow the plant to go bankrupt, or invest in LM even more funds, hoping that the enterprise manages to recover. The option to save LM is currently more viable in terms of available time. Nevertheless, Zakharin and Segals will no doubt be removed from the Board of LM. According to the ministry, the current Board is no longer trustworthy.

“In order for creditors to believe in the company’s viability and the possibility of changing the current business course, changes in the managing team need to be made. This is where our ministry’s specialists and I personally agree. Any normal creditor expects to return his money using a company’s economic activity, its continued functioning, not the realization of the loan. I believe the state has a similar opinion on this matter. With that, we believe we need to do everything in our power to make sure LM continues to function”, – Economy Minister Daniels Pavluts noted.

According to Lipmans, the company’s problems are also largely related to something noted by Ernst & Young and journalists of the Polish television – the enterprise has too many mediator firms as procurement partners. This allows for the possibility that most of LM’s profits come from the black market, circumventing taxes. The company and state budget are suffering losses while the owners are making serious money.

“Simple! There are two possibilities. One – procurement of scrap metal. Now we know that they are buying scrap metal for prices that exceed those of the local Tolmets by 25-30 EUR. Why? Because it is good for them to divide this money afterwards. This is nearly 30 million EUR annually! Can you imagine? Making this much money on scrap alone! The same goes for manufactured products – give it away through a number of third-party hands and imagine the money that forms! How can you sell your products for damping prices!? It’s pure nonsense!”, – Lipmans claims.

Zakharin denies the involvement of LM in the tax scheme. He also claims he doesn’t know how the suppliers, such as the Polish Tormetal, were acting. Members of this scheme were recently arrested in Lithuania.

“I cannot say anything, because I do not know the details of the supply and realization process. We are unable to affect this in any way. We sell our product and receive money. This is where our responsibility ends. What happens next is not up to us”, – Zakharin explained.

Proving one’s involvement is difficult. This is confirmed by the Polish law enforcement institutions.

“It is easy to intimidate a mediator. It is hard to say which side earns more money. Information regarding companies that produce steel without paying taxes is well known in the market. There are other sides to such schemes – the so-called buffers. During inspections, these organizations help companies prove they did everything they could in order to check their suppliers”, – said the head of the Central Bureau of Investigation Poland General Adam Rapacki.

Allegations have been presented to a number of individuals in Poland. A special team of specialists has been called to help with the investigation. The Polish police actively asks for updates from the Latvian State Revenue Service.

“The police is actively working on the criminal procedure. It is too soon to speculate how long it will last. But if the Polish side turns to Latvia with specific proposals, this will would be a wider matter to carry through the Prosecutor’s office”, – Internal Minister Rihards Kozlovskis said.

An interesting fact: some three years ago, when LM was given state guarantees, the State Treasury knew the risks very well. It was known that the projections in the company’s business-plan would not adhere to the industry trends and the fact that “continuous activity will losses could reduce the ready availability of funds.” This is exactly what has happened. The State Treasury’s report on this matter was addressed to then the Finance Minister Einars Repse, who was supposed to make the final decision. When asked as to why he decided to provide state guarantees anyway, the politician replied with a short statement: “There was no indication this would happen. The enterprise needed modernization. Specialists from the State Treasury and Finance Ministry provided good reports. The pledge was good enough to cover the guarantee (provided by the State Treasury). With that, there was no reason not to provide the budget provided guarantee”.

Specialists of the State Treasury, on the other hand, claim that the conclusion compiled on this matter was anything but “a good report”. This shows that then the political decision to help LM at the expense of state funds was based mainly on the argument that the enterprise should be saved because it is one of Latvia’s largest production plants and Liepaja’s main economic engine.

The government plans to discuss LM’s fate in detail on Tuesday, April 16.

Ref: 102.109.109.6920


Leave a reply

  1. JPR says:

    Liepaja going bankrupt???

    Thumb up 0 Thumb down 0

Judins says parliamentary committee «is going nowhere»

The work performed by Saeima’s investigative committee in charge of oligarch case does not fit the established goal to investigate and analyse possible state capture, says member of the committee and Unity’s Saeima faction Andrejs Judins.

Study: residents criticize development of Latvia general situation the most

With the coming of autumn, residents’ optimism has declined significantly, according to results of Baltic International Bank’s Latvian Barometer.

Number of occupied jobs in Latvia up 9.3 thousand

At the end of the first half of 2017, in Latvia there were 903.2 thousand occupied posts, and, compared to the end of the first half of 2016, the number has grown by 9.3 thousand or 1.0 %.

Latkovskis says sometimes questionable votes are lobbied in Saeima in secret

There have been cases sin which questionable votes were being lobbied in the parliament in secret. Compared with last year, this tendency is demonstrating growth, said Saeima deputy Ilmārs Latkovskis in an interview to Latvijas Avīze.

E-governance advocate Ilves comments on alleged Estonian ID card vulnerability

The ex-President of Estonia Toomas Hendrik Ilves, who has been an active advocate of e-governance has emphasised that a possible security risk with Estonian ID cards has not put that the country's reputation as an e-state at risk.

Delna invites Saeima to support initiative to liquidate option to abstain from votes

Society for openness Delna invites Saeima deputies to support public initiative and liquidate the option for deputies to abstain from votes.

82% of Estonian households use mobile internet at home

As to the choice of internet connection in Estonia, 82% of Estonian households use mobile internet at home, Estonian statisticians have estimated.

Baltic Express attracts railway cargoes; decline noted for other carriers

Railway cargo carrier Baltic Express more than doubled its cargo volumes in the first seven months of 2017. Meanwhile, other two cargo carriers – LDz Cargo and Baltic Transit Service – have suffered cargo declines. Baltic Association – Transport and Logistics notes that it is ringing the alarm over the situation in the industry, not over the interests of its members.

Survey: more than half of Latvian residents are half-serious about their health

44% of Latvian residents use all medicine prescribed by their doctor when they get sick, according to data from Mana Aptieka&Apotheka health index.

In pictures: Zapad drill in full swing

BNN offers you an insight into the quadrennial join military training of Belarus and Russia, which have been inspected in person by Russian President Vladimir Putin and Russian Defence Minister Sergey Shoygu.

Rinkēvičs invites India to open an embassy in Latvia

During the 72nd session of the UN General Assembly in New York on Monday, 18 September, Latvian Foreign Affairs Minister Edgars Rinkēvičs met with his Indian counterpart Sushma Swaraj. The two discussed political and economic cooperation between the two countries.

Norwegian top policeman sentenced to 21 years in prison for aiding hashish contraband

A court in Norway, a country often recognised as one of the least corrupt globally, has convicted a senior Norwegian police officer to 21 years in prison after finding him guilty of taking bribes and helping drugs contraband.

Road Transport Administration: transport planning in Riga does not reflect region’s scale

Road Transport Administration plans to speak with Riga and Pierīga administrations about the fractured public transport system in the region, says the administration’s chairman Kristiāns Godiņš.

Mass Ryanair cancellations expected

Irish airline Ryanair has warned that due to an internal planning problem up to 400 000 flights could be cancelled in the European Union.

Legislative draft proposed to simplify referendum procedure

The Central Election Commission has registered Open Management Partnership in Latvia signature collection association’s legislative draft submitted for the fourth time. This legislative draft proposes cancelling amendments of 8 November 2012 to the Law on National Referendum, Legislative Initiative and European Citizens’ Initiative, as reported by the commission.

Greece to lift wine tax due to low revenue

The government of Greece plans to submit draft amendments to lift the country’s year-old excise tax on wine, Greek Minister for Agricultural Development and Food has stated.

Reirs: pension budget will increase by EUR 160 million next year

Next year, pension budget will increase by more than EUR 160 million, says Latvian Welfare Minister Jānis Reirs. He explains that the total pension budget will be EUR 1.93 billion, which means funding for next year’s pensions will be 9.19% higher.

Oligarch case’s parliamentary committee settles disputes with shouting

During a meeting of Saeima’s committee entrusted with investigating Oligarch case, a loud argument broke out between Unity faction member Andrejs Judins and publicist Imants Liepiņš.

IDB: it is too soon to expect corruption to go down in traffic monitoring field

Society’s condemnation of bribery is positive, but it is currently too soon to expect the problem of bribery in road traffic monitoring field to go down, admits Internal Security Bureau chief Valters Mūrnieks.

Apinis: Latvia’s Healthcare Ministry is intellectually weak

Pēteris Apinis, head of Latvian Association of Doctors, criticizing the reform plan, saying: «Just like the Napoleon cake has no Napoleon, the reform plan has no reforms.» He believes Healthcare Ministry’s intellectual potential declined in the past three to four years and that the institution in its current state is intellectually weak.

airBaltic performed 14,324 flights in summer

In August 2017, Latvian airline airBaltic carried 386,597 passengers or 21% more than it did in the same period in 2016, as BNN was informed by the airline.

Sudraba: deputy quotas matter will be resolved in officials’ offices this year

The matter of the so-called deputy quotas will be resolved in officials’ offices this time, deputy Inguna Sudraba of To Latvia from the Heart told Latvijas Radio.

Estonia should invest in long-term productivity, environmental protection – evaluates OECD

As Estonia’s economic recovery gathers pace, it is time to work for sustainable development by protecting the environment and looking for ways to increase productivity, the Organisation for Economic Co-operation and Development has recommended.

Option to abstain from vote proposed to be liquidated to reduce possibility of hiding opinions

On Monday 18 September, a citizens’ initiative will be submitted to the Saeima to liquidate the option to abstain from votes in the parliament.

KNAB commences criminal process in state institution’s service

Corruption Prevention and Combating Bureau has commenced a criminal process for, possibly, illegal activities in a state institution service.