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"Liepajas metalurgs" could request LVL 57.6 million aid from government

 RIGA, March 25 - Although the government will have a meeting this week to discuss the problems at the joint-stock metallurgical company "Liepajas metalurgs", the company's management has already requested LVL 57.6 million aid from the government, TV3 broadcast "Neka personiga" (Nothing Personal) reported last night.

According to the broadcast, the company wants the government to permit the company not to pay its electricity bills, give the company new guarantees, and pay the company's debt to an Italian bank. The company is also asking the government that a criminal case, initiated following "Liepajas metalurgs" co-owner Kirovs Lipmans' claim, be discontinued.

"NASDAQ OMX Riga" decided today to immediately suspend trading in joint-stock metallurgical company "Liepajas metalurgs" shares, according to the stock exchange's announcement.

The trading was suspended due to price-sensitive information available in mass media, "NASDAQ OMX Riga" informs.

Media reported previously that the company's management members were paid huge salaries. Realizing that this could affect the company's chances of receiving government aid, "Liepajas metalurgs" owners were not revealing salaries paid to the company's managers. The media have found out nevertheless that in 2010 "Liepajas metalurgs" council chairman Sergejs Zaharjins was paid LVL 14,300 a month, his deputy Aleksejs Zaharjins - LVL 13,000. The salary for board member Ilja Segal was LVL 14,300, chief economist Beinta Imbovica - LVL 10,000, board chairman Valerijs Terentjevs and executive director Leonds Ptickins - LVL 6000 each. The salaries were gradually reduced in 2011 and 2012.

Also, there are suspicions that "Liepajas metalurgs" is involved in VAT fraud schemes via Polish companies that buy "Liepajas metalurgs" products. Polish Tax Board has confirmed that "Liepajas metalurgs" cooperation partners in Poland are suspected of fraud.

In April, "Liepajas metalurgs" must repay an LVL 4 million loan to Italian bank "Unicredit". The company sought the bank's permission to move the deadline to a later date, but the Italian bank said no. Furthermore, under "Liepajas metalurgs" agreement with the bank, the Italians may demand any moment that the entire loan "Liepajas metalurgs" has borrowed from the bank, LVL 51 million, be repaid if the company is found to also have other debts. And it seems it that "Liepajas metalurgs" does have such liabilities. The company has postponed the repayment of a LVL 22 million loan to "SEB" and "Citadele banka". Given that the Italian bank's loan has been underwritten by the state, it is possible that LVL 51 million will be taken from the state budget to repay the loan.

Likewise, "Liepajas metalurgs" talks with power utility "Latvenergo" about a debt of 8 million were also unsuccessful. "Latvenergo" wants the debt paid until March 28. If this does not happen, "Latvenergo" will submit an insolvency petition against the Liepaja company.

Plus the company has unpaid debts to various local companies. The total amount of "Liepajas metalurgs" debts is LVL 104 million. A rescue plan for the company envisages postponing the repayment of debts and increasing state guarantees. The company wants the government's permission for postponing the repayment of the debt to "Latvenergo", help the company with loan payments to "UniCredit", and increase state guarantees by another LVL 18 million. The company also proposes a ban on export of scrap metal from Latvia.

As reported, International audit company "Ernst&Young Baltic" has carried out an in-depth audit at the joint-stock metallurgical company "Liepajas metalurgs" that did not establish fraudulent activities in the company's operations, as the State Treasury's press officer Eva Dzelme informed LETA.

However, the auditor notes many shortcomings in the company's operations.

The State Treasury cannot further comment the report as it contains classified information. The audit report will be reviewed by the cabinet of Ministers, after which more information could be released about the audit company's findings.

The Finance Ministry signed a contract with "Ernst&Young Baltic" on performing an in-depth audit at "Liepajas metalurgs" on February 13 after the company said it would not pay the mandatory procurement component of electricity rates as it would lead the company toward bankruptcy.

In 2009, the Finance Ministry underwrote an EUR 85.6 million loan for "Liepajas metalurgs", the outstanding debt amount is currently at EUR 73.6 million.

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