Zhevago to make Kremikovtzi bid, labour unions say

16:52 Tue 13 May 2008 - Elitsa Grancharova

Vorskla Steel was set to present its offer to take over the management and operations of Bulgaria’s largest steel mill Kremikovtzi to Economy Minister Petar Dimitrov, the chairman of the Metalurzi labour union, part of the Podkrepa labour union bloc, Lyudmil Pavlov, told a news conference on May 13.

The company, which has close ties to Ukrainian businessman Konstantin Zhevago, had the only viable proposal to solve the factory’s problems, Pavlov said, as quoted by Bulgarian news agency BTA. Pavlov said that Zhevago was committed to keeping the steel mill's payroll unchanged if he takes over Kremikovtzi.

Zhevago plans to invest $10 million to pay overdue wages, Pavlov said. Another $90 million would be injected to pay off current debts and boost the cash flow to keep the steel mill running at full capacity, while $30 million will be paid to the local Ministry of Environment and Water Affairs as a guarantee that the steel mill's environmental commitments would be met.

“If Zhevago takes over the steel mill, it will be saved from liquidation,” Pavlov said.

As previously reported by The Sofia Echo, Vorskla Steel signed an agreement with the steelworks' labour unions on May 10. At that time Pavlov said that the deal would see Vorskla Steel guarantee the funding that would keep Kremikovtzi operational and its workers paid.

It was the first time that the labour unions chose a side in the race between two rival bidders looking to buy the 71 per cent majority stake held by Indian businessman Pramod Mittal - Zhevago and ArcelorMittal, the world's biggest steel maker, in which Pramod Mittal's older brother Lakshmi is the main shareholder.

Meanwhile, on May 13, Moody's Investors Service downgraded the credit ratings for Kremikovtzi and its 325-million-eur bonds after the steelworks missed interest payments on the bonds.
The ratings were cut from Caa3 to Ca, with a stable outlook. It was Moody’s second cut in the last month, after the downgrade from Caa1 to Caa3 in April.

In trading on the Bulgarian Stock Exchange on May 13, Kremikovtzi shares remained flat for the day at 12 leva a share, repeating the 12-month low from the previous day.