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The case of Litostroj Jeklo successfully brought to an end, to the benefit of all stakeholders

Ljubljana, 26 November 2018 – After years of BAMC's efforts to save the company, the real estate sale process has been brought to a successful conclusion with the signing of the contract between Litostroj Jeklo and LTH Castings. The new buyer, LTH Castings, will buy all of Litostroj Jeklo's real estate assets. The purchase money amounting to 11.5 million EUR will be used to repay most of the creditors' claims, as well as the employee social contributions. In addition, approximately 200 jobs have been preserved, as has the industrial culture of the company itself. The resolution brings benefits to all stakeholders involved – the employees, business partners, FURS and BAMC – and to a much higher degree than the bankruptcy process, which would have been the alternative.

Ever since the transfer of the claims from Abanka at the end of 2014, BAMC has been actively managing its claims against Litostroj Jeklo. During this time, it took all available measures to restructure the company and ensure its future survival. The initial aim of this was to stabilize operations and later sell the company to a suitable investor. Due to the divergence of interests between the stakeholders involved, the sale fell through and therefore the only option to preserve production was to lease the assets out, as the value of these assets is much higher if they remain in use, compared to them being liquidated. After the repeated compulsory settlement and the difficult process of divestment of assets, the company managed to sell most of its assets, which will allow for repayment of most of the creditors' claims, as well as pay the unpaid employee contributions.

The purchase price for the real estate assets pledged to BAMC as collateral is 11.5 million EUR, 4.5 million EUR of which will be earmarked for payment of employee contributions, which will settle their claims almost fully. The remaining amount of 7 million EUR is intended for repayment of BAMC's claims, which is much more than under the bankruptcy scenario, where the liquidation values would be much lower, while there would be a great deal of additional costs.

Chronology of saving Litostroj Jeklo:

  • First attempt to sell: The claims against Litostroj Jeklo were transferred from Abanka to BAMC in October 2014, when the compulsory settlement was nearly finished. Immediately after the end of the compulsory settlement, it turned out that the company is once again insolvent and unable to continue its business activities. Due to the lack of orders and negative cash flows, BAMC then assessed that the only possibility to prevent the company's bankruptcy is to sell it. In February 2015, BAMC began the process of selling its claims and equity of Litostroj Jeklo. In April 2015, the creditors received a bid from a potential investor, which was not accepted due to one investor's unwillingness to agree to the terms. After additional negotiations, the investor sent the financial creditors two improved individual binding bids in August 2015, referring to the purchase of claims and shares of equity. The investor undertook a second due diligence review of Litostroj Jeklo and announced in November 2015 that they were withdrawing from the deal.  
  • Alternative scenario Since the company obtained additional orders which would allow it to stay in business after relieving it of past debt, BAMC worked with the company to prepare an alternative scenario: investing fresh liquidity with a state guarantee, so that the company pays off all its debts and use fresh operating capital to finance day-to-day operations. The aim was to stabilize operations and later sell the company. Under this scenario, BAMC would take over most of the risk exposure, and the state would be exposed to risk only in the event of bankruptcy. Unfortunately, the required consent could not be obtained for this scenario, meaning that BAMC exhausted all options to restructure Litostroj Jeklo.
     
  • New interest in the purchase A German investor had expressed interest in 2017, however they later withdrew from the deal due to the creditors' high expectations (FURS' demanded full repayment of liabilities, including default interest) and uncertainty.
     
  • Leasing assets: Ever since the start of the first compulsory settlement in 2014, the company was unable to pay employee contributions for its workers, so these liabilities were increasing substantially. Towards the end of 2017, the company decided that a repeated compulsory settlement is the only way to ensure payment of employee contributions and maximizing the recovery value for the creditors. The aim of this repeat compulsory settlement was to lease and divest the company's assets. The company successfully leased its real estate and machinery, and the leaseholder is continuing production at the aforementioned location. This has allowed a certain number of employment to keep their jobs.
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