Romania announced on August 12 that it is to make another attempt to sell off Oltchim in December, after two previous attempts ended in failure. Chinese investors are seen most likely to take on the insolvent chemicals company, as Bucharest looks to get its privatization programme back on track to keep the IMF happy.
Oltchim’s administrators - Rominsolv and BDO Business Restructuring - announced in a statement posted on the Bucharest stock exchange’s website that a new attempt to sell off the company has been scheduled for December 15. It will be the third attempt at privatization.
Bucharest first tried to sell off Oltchim, one of the largest chemicals companies in southeast Europe, in 2012. Following that failure, and a restructuring, another doomed bid to offload the company came in early 2014.
In the wake of the second scrapped sale, administrator Gheorghe Piperea told journalists in June that Oltchim’s management team would be given six months to reduce losses and make it more attractive for investors. Bucharest now clearly hopes this will bring the lengthy saga to an end.
Piperea also indicated in early summer that a Chinese consortium - comprising Baota Petrochemical and Junlun Petroleum - will have the first option to buy. “The Chinese will receive preferential treatment for the deal to buy Oltchim and Arpechim and they’re willing to pay for this right," he said. "We have six months to reach a break-even level."
The first attempt to sell off the company ended in farce. A deal struck with the winning bidder - former journalist and owner of the OTV television station Dan Diaconescu - was cancelled after he failed to come up with the €45m he had agreed to pay for a 54.8% stake in the company. Diaconescu, who had no experience of running a chemicals company, was selected over Germany’s PCC SE and two local industrial companies, because of the high price he offered.
Shortly after his bid was selected, Diaconescu demanded new terms, including a guarantee that the state would pay salary arrears for Oltchim workers and public-sector creditors would refrain from forcing it into insolvency. Prime Minister Victor Ponta eventually called off the sale in October 2012, saying he would “end this circus.”
At the urging of the International Monetary Fund (IMF), Oltchim was declared insolvent in January 2013. The Romanian economy ministry then restructured the company, creating the Oltchim SPV, a special purpose vehicle that owns Oltchim’s core assets valued at €305.2m.
Despite this, the second attempt to sell in early 2014 also flopped. An initial deadline of January 28 was postponed by two months; a third deadline put back to June then expired with still no bidders coming forward.
That lack of interest is perhaps not so surprising. The company on the block is currently operating at just 25% of capacity, although there are plans to open additional facilities, which will bring production up to 40% by December. However, its not just at company level that a sale is vital.
The restructuring and sale of state owned companies is a major part of Romania’s commitment to the IMF, which approved a €1.98bn stand-by arrangement with Bucharest in September. A pledge to accelerate the privatisation process is a leading edge of the agreement. The government has had mixed success in offloading major state owned enterprises thus far, however.
On the one hand, several, including power company Electrica and utility Romgaz have successfully listed. Bucharest also passed an emergency decree to set up a new department to handle privatisation in April. However, attempts to sell rail freight operator CFR Marfa and Posta Romana went the same way as Oltchim.
In June 2013, Bucharest struck a €202m deal to sell 51% of CFR Marfa to private Romanian rail company Grupul Feroviar Roman (GFR), but the deal collapsed four months later, with GFR and the government each blaming the other for the breakdown. An attempt to sell heavily indebted Posta Romana also failed, and while Bucharest is looking for an investor to take majority control, there are also plans to float it on the domestic stock exchange if no bidder comes forward.
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