Uljanik Searches for Investors as Potential Bankruptcy Looms

Lauren Simmonds

Updated on:

Will Uljanik be saved? Minister Horvat is in negotiations with four potential investors to replace Danko Končar as a partner.

As Marina Sunjerga/VL/Poslovni Dnevnik writes on the 25th of October, 2018, all of Uljanik’s guarantees (warrants) have been calculated without interest and fees that the state will have to pay off instead of Uljanik, which has already gone through all of the money from previous guarantees.

Workers of ailing shipyards 3 Maj and Uljanik continue to strike, salaries for September have not and will not be paid, and no answer as to just what exactly they can hope for has been received from either Uljanik’s management, nor from the political system.

According to unofficial information from the former 4,200 workers of the two shipyards, about eighty former employees have fled abroad, mostly to European companies. Workers in Rijeka are under particular pressure because they are anxiously awaiting the news of whether or not some of the creditors will start bankcrupty proceedings.

The conditions for starting bankruptcy proceedings due to a 60 (consecutive) day block on the accounts have now been met, but neither the management of the company nor the majority of creditors to whom the Uljanik Group owed more than 760 million kuna decided on this step, which would unarguably further complicate an already extremely bleak situation. At the same time, Danko Končar, more specifically his company Kermas Energija, which claims to be a new strategic investor in both shipyards, is looking for investors for this transaction.

Minister Darko Horvat confirmed that for Uljanik, Danko Končar now wants to enter into partnership with an Australian partner, Glen Moroney, the founder of Scenic group, for which Uljanik has been building a polar cruiser.

According to the restructuring plan, Končar would have to accept over 347 million euro in debt, and Horvat announced last week that he would seek proof of financial readiness for the transaction, via the means of a payment of 200 million euro.

In reality, none of this will happen because Končar can’t legally pay any money to the Uljanik Group, except for loans, given the fact that restructuring plan has actually been accepted, which is a precondition for starting the recapitalisation process.

Owing to the above, it remains uncertain that there would be any such transaction, nor would be be likely that the proper precautionary measures had been acquired because so far, Končar had no financial obligation to recapitalise Uljanik.

Horvat is however in negotiations with four potential investors who would replace Končar, but they are mostly interested in the 3.Maj shipyard in Rijeka. The shipyard’s ”order book” fell to just five ships, according to a detailed report by Finance Minister Zdravko Marić, which was presented at a government session. It shows that Uljanik has been granted 7.5 billion kuna in guarantees over the past eight years, and the remaining 4.3 billion kuna of active guarantees will have to be paid by the state in the end.

It is interesting to note in the report that only three of the thirteen vessels listed in the order book appear, which are in a higher degree of completion. The defective fact is that some of them were issued at the beginning of 2015, and three to four years later, not only have they not been completed, but only five to ten percent of their construction work has actually been undertaken.

Therefore, according to the detailed calculations of Minister Marić, the state will have to settle at least 2.3 billion kuna of Uljanik’s debts, plus the accumulated interest and fees to the banks by the end of the year.

Namely, all the sums of guarantees have been calculated without interest and fees and therefore the actual commitments are significantly higher than those that have been initially presented. In the meantime, Marić has received requests for the settling of more than one billion kuna of debt. Therefore, in his Uljanik report, Minister Marić clearly stated that due to the growth of interest expenses, the payment of debts to the banks should immediately start being paid in order to avoid at least the extra costs.

There is no money for Uljanik in the state budget, and the commitments will be reflected in the re-balance expected in November.

After a blurry few months, it is now quite clear that bankruptcy is probably the most likely option for Uljanik if no rescue appears in the form of a new industry investor. Končar wants real estate and he doesn’t attempt to hide that fact, the state has its hands vey much tied and can’t offer much help, if any at all, meaning that the only hope left for Uljanik is that at least one of Horvat’s potential investors is serious.

Click here for the original article by Marina Sunjerga/VL on Poslovni Dnevnik

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