Source: Forbes Date: 03.09.2024
The roughery and rolling mill for flat products in the bankrupt Liberty Ostrava steelworks should be financed by Vítkovice Machinery Trade from the CE Industries group of billionaire Jaroslav Strnad from October. After intensive negotiations, it submitted the most favourable bid among the bidders for tolling and loan financing and Liberty's insolvency administrator Simon Petak recommended it to the interim creditors' committee. It is to save up to two thousand jobs in production and service operations. This was disclosed by the insolvency administrator on Tuesday.
"According to our analyses, this fundamental decision will result in cost savings and an increase in the value of the assets in total in the order of at least hundreds of millions, but rather lower billions of crowns, and the retention of up to two thousand jobs. Our entire team has worked to the maximum and thanks to this we can responsibly decide in such a short time that the secondary production at plants 15 (rourovna) and 16 (roller mill) will be resumed," Peták said.
In tolling financing, the tolling company purchases the material, provides it to the producer and gives him a remuneration for processing it. The insolvency administrator will now negotiate contractual terms with VMT. Along with the tolling financing, Liberty will also receive funds for employee salaries in the form of a loan.
"It was very important to select the best and most trustworthy partner that best meets our requirements. The selected partner will provide an amount of around two to three billion crowns for tolling and credit financing of more than five hundred million crowns to cover the operating costs of the company," said the insolvency administrator.
Petr Smutný, a partner at PwC, the consultancy firm that worked on the investor selection, said that plants 15 and 16 are two key parts of the company, currently holding the greatest value and potential for a future owner. "This is linked to the large amount of work that needs to be done. The extreme dedication of the entire team is confirmed by the fact that we secured comparable offers within a fortnight, thoroughly evaluated them and at the same time prepared the necessary economic and legal analyses," Smutný said.
According to the insolvency administrator, VMT's bid, after a thorough and detailed evaluation, most closely met the required parameters. Other bidders were Třinecké železárny from the Moravia Steel group and Donquixote. "In less than two weeks after obtaining the disposition rights to plants 15 and 16, the insolvency administrator and his team managed to negotiate significantly better financing terms compared to the offers that had previously been negotiated by the smelter's board of directors for almost a year. In parallel, an expert assessment of the impact of tolling on the value of the company was still underway," said Lukáš Lhoták, manager of Export Guarantee and Insurance Company.
Most of Liberty Ostrava's operations, which employ more than 4,000 people, have been idle since last December, when Tameh Czech stopped supplying energy to the smelter. Most of the employees have been at home since then. Since June, the company has been bankrupt, it has also been unable to dispose of a substantial part of its assets, and in early August it began shutting down its coke plant. At the beginning of the year, the company still had around five thousand employees. In July, the smelter announced that it would close the coke plant and lay off 2,600 people, 2,300 of whom are expected to leave in the fall. However, some of the employees have already left the company themselves. The Silesian smelter has been owned by the Liberty Steel Group of British businessman Sanjeev Gupta's GFG Alliance since 2019. Liberty Ostrava produced steel mainly for the construction, engineering and petrochemical industries.
The holding company CE Industries is active in multiple sectors such as railway engineering, energy, waste recycling and also in the food and drug industry. In 2022, the group achieved record sales of CZK 8.3 billion, according to figures in its annual report, and the holding consisted of 37 companies with nearly 1,500 employees. Vítkovice Machinery Trade's sales rose to CZK 3.335 billion in 2022, with operating profit before tax of CZK 104.5 million. The group is controlled by Jaroslav Strnad, who also founded the industrial holding Czechoslovak Group in the past. The group is now headed by his son Michal Strnad, who ranks ninth in the Forbes ranking of the richest Czechs with assets worth CZK 45.9 billion.