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Friday 19.10.2018 | Name days: Drosma, Drosmis, Elīna

Liepājas metalurgs calls the state to capitalize the company's debts

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RULiepājas metalurgs (LM) Council, Board and trade union believe the capitalization of the company’s debts to Finance Ministry, Citadele Bank and Latvenergo is the last possible option for LM to continue to work and allow the state of Latvia to recover its investments. Which would be impossible if LM goes bankrupt.

As a result of capitalization, the state would not need to invest additional funds into LM. In return, the state would receive full control over LM.

It would allow LM to recover its production and Latvenergo to keep a notable consumer. LM uses approximately 10% of the total volume of electrical energy produced in Latvia. This would also allow LM to stop job cuts and retain workers’ salaries and business activity.

Because of the aforementioned reasons, the management of LM and its trade union had turned to leaders of the state of Latvia with an official request. The core of the request was stated in a letter sent to President of Latvia Andris Berzins, Saeima Chairwoman Solvita Āboltiņa and Prime Minister Valdis Dombrovskis.

Shareholders of LM continue to mislead their workers and other Latvian residents with statements in Latvian media regarding the possible capitalization of the company’s debts by the state. On October 10, 2013, the largest shareholders of the company received proposals for amendments to the legal protection plan, which contradicts today’s issued statement, Finance Ministry reports.

The ministry calls the company to work in accordance with the plan that was approved by creditors, not spread public statements in mass media.

The request offered by LM regarding debt capitalization is impossible from the point of view of state support, because it would be inevitably viewed as official support of the state of Latvia for a private company. It would be impossible to coordinate this kind of support with European Commission, ministry notes.

Any involvement of the state of Latvia can be interpreted as acceptable if other creditors of LM would involve themselves as well and current shareholders of LM do not benefit from this in any way. Opposite to recent claims, insolvency does not mean that it is impossible for a company to recover and start working again. A company can continue to work under different shareholders, Finance Ministry concludes.

As it was previously reported, LM had ended up in financial difficulties and was forced to cease all production. This July, Latvia’s State Treasury had paid a loan on behalf of LM to Italian UniCredit worth EUR 67,465,056. Before then, the State Treasury had performed another payment to the Italian bank on behalf of LM – EUR 6,128,456.

Liepaja Court has approved the company’s legal protection plan, which was developed by LM’s experts and coordinated with more than 55% of creditors and creditors club’s attracted financial consultant Prudentia Advisers.

Lm plans to perform specific measures as part of the legal protection plan. These measures are aimed at restoring production and focusing export on the geographically nearest markets. The plan also provides for an in-depth market analysis in order for the company to be able to function with a higher profit potential. In order to secure additional income during the legal protection plan’s execution, LM is planned to be detached from its assets that are not related to its main functions by selling them to other businesses or individuals.

In an interview to Dienas Bizness, Finance Minister Andris Vilks had mentioned that LM is more likely to end up insolvent than restore production. However, this does not mean the company cannot be restored back to life. There is still hope that LM will continue to function. The question remains about terms and method how to achieve it. Vilks believes a suitable investor will be found sooner or later.


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  1. Ilmars says:

    If they plan to do an “in depth market analysis” to look at the profit potential of LM , then why dont they do it now, before they capitalize the losses to the State ?
    They should get the opinion of an international world class insolvency firm from somewhere like London and be guided by that.
    The preoccupation of the Govt. seems to be chasing past losses, rather than the future viability of LM.
    If LM was unviable before, then why is it going to be viable now ?
    They are throwing good money after bad.

  2. Marianna says:

    LM is already dead .So stop the bleeding of public money. Use the money left to pay salaries and severance pay thus the story will come to end.

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