Bulgaria’s ailing steel behemoth Kremikovtzi is on the verge of asset sale after Sofia City Court rejected the plant’s rescue proposal, penned by the steel mill's bankruptcy receiver for consideration by creditors.

The court's decision was caused by the refusal of Finance Minister Simeon Dyankov to reschedule the company’s debt to state-owned companies, a pre-requisite before the plan could be presented to creditors.

Without the debt rescheduling, Kremikovtzi would have to be declared insolvent again on the day the rescue plan was approved.

The Finance Ministry said that its refusal stemmed from the absence of guarantees and clarity on payment of the claims once they have been rescheduled.

Sources familiar with the situation told Dnevnik that the company’s management would not contest the court decision because of Dyankov’s refusal.

Bulgarian legislation stipulates that unless a rescue plan is endorsed by creditors, the court has to declare the debtor insolvent. Kremikovtzi entered bankruptcy in August 2008. Lawyers told Dnevnik the only question left is when insolvency would take effect.

At end-September, the plant’s assets were valued at 837.2 million leva at market price, while their liquidation value was estimated at 662.7 million leva.

Kremikovtzi's debts, however, stand at 1.84 billion leva. The government has filed a lawsuit with the Supreme Administrative Court, seeking a further 698 million leva - state aid it had previously given the steelworks and interest on that sum.

A similar suit was rejected by the Sofia Administrative Court, but the figure would be added to the debt pile if it is confirmed by the higher court.

Source: Dnevnik