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Romanian Govt To Convert Into Shrs Oltchim’s Debts To Privatization Auth

Romania’s Government decided to convert into shares the EUR134 million debt of state-owned chemical plant Oltchim (OLT.RO) to the country’s privatization authority AVAS and to start the procedures to guarantee 80% of a EUR300 million loan taken by the company.
Romanian Govt To Convert Into Shrs Oltchim’s Debts To Privatization Auth
16 iul. 2009, 09:49, English

The decisions were announced late Wednesday by Prime Minister Emil Boc, at the end of the Government meeting. He said the Executive is waiting for European Commission’s answer regarding these decisions.

Oltchim has previously announced its intention to borrow EUR70 million to buy the petrochemical activity of Arpechim refinery owned by the country’s largest oil company Petrom (SNP.RO).

Thus, the company has asked state-owned lender Eximbank for a EUR49 million guarantee. End-June, Eximbank approved a EUR46 million guarantee for Oltchim, to allow the plant to buy the petrochemical assets.

Last week, Boc announced the Cabinet would approve a memorandum to guarantee 80% of Oltchim’s investment loans, estimated at EUR500 million, and the conversion into shares of Oltchim’s debts towards AVAS.

In 2002, AVAS took over from the Finance Ministry Oltchim’s debts worth 508.6 million lei (EUR1=RON4.2137).

Following several payments, AVAS recovered RON181.542, so that the plant’s current debt towards the institution is of RON508.48 million, plus around $10 million in interests for the period November 28, 2003 – September 28, 2006.

Thus, Oltchim’s debts towards AVAS total around $165 million.

Early-February, Romanian senators rejected the government’s emergency ordinance to annul the conversion into shares of Oltchim’s debts towards AVAS. The Cabinet motivated its proposal by saying the European Commission might consider the conversion an illegal state aid.

However, the Senate considered Oltchim’s payment capacity would be affected if the aid is not granted.

In June, Oltchim’s Board decided to lower salaries by 15% for three months, to put 1,400 people on technical unemployment from June to August and to lay off 500 employees as of September 1.

The plant estimates to end this year with a RON151.7 million loss, down 35.14% compared with RON234 million in 2008. Oltchim sees its 2009 revenues down 12%, to RON1.7 billion, from RON2.01 billion a year earlier.

Oltchim is majority owned by the Economy Ministry, with a 54.79% stake, while Germany’s PCC SE holds a 12.15% stake.

On the Bucharest Stock Exchange, Oltchim shares closed Wednesday at RON0.32, down 0.31% on the day.