Uljanik’s Restructuring Plan Brings New (Old) Strategic Partner

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December 6, 2018 — The search for the Uljanik Shipyard’s savior didn’t reach into the depths of the Croatian or European business community. In fact, it didn’t go far at all. The government and current management reportedly settled on the man already holding the position since March: Danko Končar, a billionaire mining magnate and one of the richest members of Croatia’s diaspora.

The ailing shipyard’s board and government’s Economic Ministry are reportedly drafting a restructuring program which will be sent to Brussels, designed to end a year-long effort to map Uljanik’s way out of HRK 4.5 billion of debt. The obligations include substantial state guarantees which could put a dent into the Croatian budget if unpaid.

The Uljanik Group’s dissolution would cost thousands of jobs at a time when the nation can ill-afford another export-oriented economic sector collapsing.

“I would say this is now close to the end,” said president of Uljanik’s Management Board Emil Bulić. “It is time for us to reach a final decision.”

Končar claims his company Kermas Limited cannot begin its intervention until both the Croatian government and European Commission approve the plan.

Končar won’t use his estimated $15 billion in net worth to directly bail out Uljanik. The new program doesn’t equate a strategic parter with financing, according to the Zagreb native.

The 76-year-old Končar added he’s willing to share the strategic partner role with others, or even step aside if necessary.

When asked if Uljanik is sustainable as a shipbuilding operation, Končar reportedly said he’s “always optimistic.” Earlier restructuring proposals suggested ditching the shipyard wholesale for real estate and tourism projects.

The shipbuilding industry’s seemingly-perpetual crisis has been an albatross around the neck of successive Croatian governments. Former Prime Minister Zoran Milanović was among several to declare the ailing shipbuilding group’s restructuring “done” — in 2015.

“Croatia has not only saved, but has also strengthened its shipbuilding industry,” he said at the time, right after the group added 22 ships to its order books. The orders would keep the shipyard busy until 2018. Croatia’s shipyards enjoyed a Renaissance. It didn’t last.

The long list of profitable orders began petering out in late 2017, with few new ones taking their place. Uljanik Group’s 2017 losses totaled 680 million kuna, despite a growth in revenue over the previous year. As soon as the calendar flipped to 2018, Croatia’ largest shipyard was in crisis. The indebted shipyards were soon being compared to the flailing conglomerate Agrokor.

The shipyard needed an urgent injection of cash, setting off a year-long back-and-forth between a Croatian government trying to rescue the shipyards, and European rules limiting state aid.

The true scope of Uljanik’s financial distress emerged this summer, after the drawn-out search for a generous, cash-flush strategic partner instead produced a profit-first fiscal disciplinarian: Končar. The billionaire was already leading another shipyard, Brodotrogir in Split, through a messy restructuring. Eventually, Ulanjik stop paying its employees.

The lack of regular paychecks led to several union-backed strikes by workers at both Uljanik in Pula and 3. Maj in Rijeka.

The first attempt at a restructuring was sent back by the European Commission, with 75 objections. Some plans to rescue the shipyard envisaged a total abandonment of shipbuilding, instead turning to real estate.

The company has been living in triage ever since, seeking a strategic partner for months. Italian firm Finacantieri and Ukraine’s Smart Holding have been bandied about, alongside Končar, as potential partners. Yet neither has officially signed on.

The government’s recently-passed budget includes a minimum HRK 2.5 billion in enforced guarantees allocated to the Uljanik shipbuilding group.

Conversations between Končar and striking unions three days ago did not yield results, according to Boris Cerovac, leader of the Jadransko Union.

“[Končar told us] if we think of a ‘strategic partner’ as someone who will gives us advice, then yes we have that kind of strategic partner,” Cerovac said after the fruitless meeting. “If we think we have a ‘strategic partern’ who will give us money, that we do not have.”

That meeting ended with yet another strike by Uljanik’s workers.

Uljanik’s union leaders claim time is running out to cobble together a deal, as workers continue to clock in and out without receiving a full paycheck since August. (They have, however, gotten minimum wages of about HRK 2.750 for the month of October.)

The latest proposed rescue of Uljanik still leaves a door open for the company’s other ailing shipyard — 3. Maj — to join the restructuring program. It also gives Končar leeway to back out of the deal if any changes or additions don’t suit him, Assistant Minister of Economics Zvonimir Novak said, according to Nacional.

Končar was coy about any other shipyard’s potential involvement, especially 3. Maj, which some claim is so close to Uljanik it creates needless competition. Končar disagreed, saying the shipyards’ proximity could lead to synergy, not a duplication of services.

“One function can be handled in one shipyard, and another in the other one,” he said.

For more on the Uljanik shipyard crisis, click here.


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