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Latvian ailing steel company unlikely to receive cash injections: gov't officials

Xinhua, May 25, 2016 Adjust font size:

Latvia's ailing steelmaker KVV Liepajas Metalurgs is unlikely to receive any further cash injections from its Ukrainian owners or the Latvian government, officials told reporters Tuesday.

The metallurgical company, based in the southwestern Latvian port city of Liepaja, is now running a 1.5 million euro (1.67 million U.S. dollars) tax debt, Vladimirs Loginovs, the head of the Latvian Privatization Agency, said.

As the company's secured creditor, the government cannot lodge an insolvency claim against KVV Liepajas Metalurgs and expects other creditors, such as the company's employees or gas and electricity suppliers, to do so.

The government also decided to closely follow the situation at the steelworks.

Although the government has rejected the company's restructuring plan proposed by its owner, Ukraine's KVV Group, Economics Minister Arvils Aseradens said that the enterprise might still be re-launched.

The minister explained that KVV Liepajas Metalurgs has a modern melting furnace, and if it managed to purchase a new rolling mill, the company might change its business profile and focus on making more innovative products.

"The European Union has been taking increasingly resolute anti-dumping measures, and we see that the situation in the market is improving. So there is hope and I do not want to say at this point that the whole project has to be scrapped," Aseradens said.

The economics minister also said that selling the steelworks' assets as scrap metal would be unwise. "Experts, too, have recommended selling the enterprise as a single entity and not in pieces," he said.

Ukraine's KVV Group acquired Liepajas Metalurgs in 2014, promising to pay 107 million euros in several installments for the insolvent metallurgy company. The Ukrainians still owe 60 million euros to the Latvian government, according to Treasury information.

After struggling with financial troubles for months, KVV Liepajas Metalurgs halted production in March and laid off some 300 workers. About 100 workers remain to keep the steel plant on "standby mode."

The management said then that the decision to suspend production and conserve the KVV Liepajas Metalurgs plant was taken because of an ongoing crisis in the global metal industry and the Latvian government's reluctance to support the debt-ridden enterprise.

Liepajas Metalurgs was declared insolvent in November 2013 after the company ran into financial trouble and had to cease production in spring 2013 due to a shortage of working capital. Enditem