November 20, 2008

Kremikovtzi creditors concerned over insolvency process

Reuters reported that creditors of ailing Bulgarian steelmaker Kremikovtzi fear ending up empty handed because of the way the country's courts are handling its insolvency.

A spokesman for bond holders said that creditors have taken their concerns to the European Commission, which is due to publish a report on the progress in fighting corruption in Bulgaria and Romania on July 23rd 2008, 19 months after they joined the EU.

Mr Justin Holland VP of investment bank Houlihan Lokey who represents a group of Kremikovtzi bond holders said that "We have real concerns regarding transparency and integrity of the process. We have met some people at the Commission about the issue.”

Mr Holland told Reuters that the creditors, which hold half of Kremikovtzi's EUR 350 million (USD 549.9 million) worth of bonds, believed their interest could be harmed by the way the court was administering the mill's insolvency process. He said that under Bulgarian law insolvency cases are heard behind closed doors and courts do not provide information on ongoing cases.

Mr Holland said that he was concerned the court might declare that Kremikovtzi had been bankrupt since 2004, which might invalidate the creditors' financial claims on the bonds which were issued in 2006. He added that "In this case we might have a zero recovery from our investment.”

But a spokeswoman for the Sofia City Court dismissed the creditors' comments and said that "It is an attempt to pressure the court."