EC starts probe into debt write off for Romania’s Oltchim

By bne IntelliNews April 10, 2016

The European Commission said on April 8 it has started an in-depth investigation to verify if the debt write-offs by the Romanian state and continued supplies by state-owned companies to local petrochemical company Oltchim were in line with EU rules.

The probe comes shortly after shareholders of local chemical products manufacturer Chimcomplex Borzesti approved the participation of the company in the takeover of troubled chemical plant Oltchim. Despite the fact the investigation could last up to one year, Chimcomplex said it still intends to make a bid for Oltchim.

The Romanian authorities have repeatedly attempted to privatise Oltchim but without success. 

Oltchim, 54.8% owned by the Romanian state, has been having financial difficulties for years. It was declared insolvent in 2013. Since then, it has been in the process of reorganisation following a plan established by the insolvency administrator, with the aim of paying past debts from the proceeds of a future privatisation. As the estimated sale price in the event of a privatisation would not cover the entire debt, Oltchim's public creditors have accepted total or significant debt waivers.

“Following the economic difficulties of Oltchim and the cancellation of public debts owed by the company, we need to verify whether a private creditor would have accepted to act in the same way,” commissioner Margrethe Vestager in charge of competition policy said.

“Thanks to its recent reorganisation, Oltchim's financial situation has improved and Romania hopes to find a new investor. Our aim is to facilitate a sustainable future for the economic activities of the company without the need for further government support," she added.

Specifically, the commission will investigate the accumulation of debts owed to the Romanian Authority on managing State assets (AAAS), debt cancellations by AAAS and various state-owned enterprises under the insolvency administrator's reorganisation plan and the support to the operations of Oltchim by two state-owned companies (CET Govora and Salrom) which, despite the deteriorating financial situation of Oltchim, continued supplies of electricity, steam and saline solutions to the chemical plant.

Chimcomplex said it is still interested in Oltchim and added that Oltchim’s reorganization plan envisages that the sale will be made via Oltchim SPV, a company to which the chemical plant’s debt has not been transferred.

Oltchim’s core assets have been transferred to Oltchim SPV, which will be auctioned off, and the revenues from the sale of the SPV will be used to pay Oltchim’s debts, under the managers’ strategy.

“Chimcomplex is firmly committed to place a bid in the coming period to purchase the viable assets of the plant in Ramnicu Valcea, grouped in Oltchim SPV, with the aim of creating the National Chemical Company,” it said in a statement quoted by economica.net.

However, it warned that should the EC’s investigation show that Romania provided illegal state aid and AAAS has to recover the funds, this could lead to bankruptcy.

Romania’s economy ministry said in a statement that the probe launched by the commission is an important step in the clarification of Oltchim’s economic reorganisation and sale.

“Taking into consideration the favourable perspectives for the company’s sale, the clarification of these aspects is important in terms of giving legal security to the potential investor,” economy minister Costin Borc said.

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