After Kremikovtzi recently became the target of construction investors and local municipal planners, Bulgaria’s biggest steel producer’s shareholders said that they might require the company to declare bankruptcy. But Kremikovtzi management has countered that there is no justification for such a move.

On November 22, Dnevnik daily reported that some of the owners of the bonds guaranteed with part of Kremikovtzi’s assets were ready to require the steel producer to declare bankruptcy, as they claim the factory had not kept to some of the engagements undertaken in a contract on emitting the securities.

Law Debenture Trust Corporation (LDTC), the emission trustee, sent Kremikovtzi a letter in mid-November saying that the company was not fulfilling its obligations.

According to Kremikovtzi management, the creditors’ reproofs concerned only the lack of certification from an independent auditor and the absence of some management and accounting control instruments.

Bulgarian Steel Finance BV issued the loan instruments to the benefit of Kremikovtzi, Dnevnik reported. The obligation emission, amounting to 325 million leva, was issued in spring 2006 and has a 12 per cent interest and maturity in 2013. Kremikovtzi steel production equipment is the security for the emission.

Financial company Balkan Capital Management also informed about the possible risks in an analysis, noting that the factory’s four largest shareholders, holding securities worth more than 100 million euro each, had formed a committee of creditors. They were not happy with the negative financial results of the company and with the fall in its stock values, as well as with the lack of explanation for the loss of 72 million leva in the third quarter, along with management’s silence about other negative data.

According to a high-ranking manager at Kremikovtzi, who requested to remain anonymous, an auditors’ certificate had not been issued, but he said it would be ready and sent in a few days. He said that a condition for claims before the term set for the bond’s principal and for discontinued payments could arise only when payments had stopped or activities had ceased, and neither of these had happened. The reason for the delay in issuing an auditor’s certificate, he said, was the introduction of an internal audit electronic system. The system used by the external auditors was not yet set up to be able to exchange information with this system.

The terms of the Kremikovtzi bond contract are confidential and the amount of the deposit, by which the factory guaranteed the stocks, has not been disclosed. LDTC also refused to comment, saying that the matter was confidential.

Meanwhile, on November 21 trade unions at Kremikovtzi alleged that the Government was behind attempts to get the factory liquidated, and alleged that Environmental and Water Affairs Minister Djevdet Chakurov was trying to use extortion to achieve this. Metalitsi confederation chairperson Vassil Yanachkov, also director of the Confederation of Independent Trade Unions in the factory, said that he had asked Chakurov several times whether there were obstacles to the issuing of a permit for the complex, new requirements and specifications for the management, but his requests had been refused.