Steel maker Vorskla Steel, which reportedly has close ties to Ukrainian businessman Konstantin Zhevago, one of the bidders for Bulgaria's biggest steel mill Kremikovtzi, signed an agreement with the steelworks' labour unions on May 10, Bulgarian news agency BTA reported.

The deal sees Vorskla Steel guarantee the funding that would keep Kremikovtzi operational, its workers paid and a chunk of the profit invested in the steel mill's modernisation, BTA quoted the chairman of the Metalurzi labour union, part of the Podkrepa labour union bloc, Lyudmil Pavlov as saying.

The agreement is the first time the labour unions picked a side in the race between two rival bidders looking to buy the 71 per cent majority stake held by Indian businessman Pramod Mittal.

Ukrainian billionaire Zhevago, who controls London-listed iron ore mining producer Ferrexpo, is facing stiff competition from ArcelorMittal, the world's biggest steel maker, in which Pramod Mittal's older brother Lakshmi is the main shareholder.

Zhevago also has the support of the Metalitsi labour union, a member of Bulgaria's other influential labour bloc CITUB, investor.bg reported on the same day.

"We have been hearing only general things and nothing specific from Arcelor until now, but the deadlines are killing Kremikovtzi when it comes to the environment. We have no time to wait," the website quoted Metalitsi chairman Vassil Yanachkov as saying.

Unlike ArcelorMittal, which was reported earlier this week to be mulling an offer of up to $700 million for the steelworks, Zhevago is interested in having the steel mill process Ferrexpo's raw materials, but was willing to insure that wages were paid on time as well, Yanachkov said.

Kremikovtzi employees have repeatedly protested over the past six months against delayed payment of salaries.

The holders of Kremikovtzi's 325-million-euro bond issue, who are pressuring Pramod Mittal into selling his stake, are understood to be favouring ArcelorMittal's offer because Zhevago, who himself is reported to have purchased around 30 per cent of the bonds, is unwilling to pay out the principal of the bond, which the bond holders are insisting on.