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Wednesday, November 17, 2004
Business in Romania blog
Romanian state will take over the 400m euro debts from Rafo and Carom, AVAS chairman Mircea Ursache says.

A new scandal is brewing at the Authority for State Assets Recovery (AVAS), following an announcement the authority would assume 400 million euros in debts the Onesti-based Rafo refinery and rubber manufacturer Carom owe the state.

AVAS will also take over the two companies debts to the Iasi Customs Department as well as another 120 million euros in debts the state-owned thermal power plants owe Termoelectrica.

The government last week passed an ordinance concerning the takeover of the debts of the two companies.

The Finance Ministry, the Economy and Trade Ministry, AVAS and the National Control Authority (ANC) developed the bill.

Ursache tried to explain the government decision by citing social reasons. "We are talking about thousands of employees and their families and important amounts of money coming from exports."

The AVAS official claimed the International Monetary Fund (IMF) backed this decision, adding the agreement concluded with the Fund would need to be changed.

However, analysts doubt the sincerity of the AVAS statement concerning the green light from the IMF. In September, the IMF strongly opposed any process that would lead to the state regaining controlling shares in the loss-making company and asked for bankruptcy to be declared.

"We have also asked the Finance Ministry for an opinion regarding the viability of the judicial reorganization plan, which is to be changed. I cannot accept the existing plan mainly because converting the debts at the share's face value (25,000 ROL/share) would mean state aid. If I approve the plan, I will do it if it stipulates the transaction is to take place at the value of the shares in the market," Ursache said.

Rafo's debts exceed 400 million euros Rafo filed for judicial reorganization after the General Public Finance Department in Bacau County asked the court to begin bankruptcy proceedings to recover debts to the state totaling 7.6 trillion ROL (195 million euros).

According to Rafo financial director Virginia Velican, the debt volume is increasing every month with the addition of penalties. Rafo has to pay the Finance Ministry over 8 trillion ROL (203 million euros) and another 2.3 trillion ROL (57.4 million euros) to Petrom, Romania's largest oil company.

It also owes more than 5 trillion ROL (127 million euros) to Faber, the company which imports raw materials and markets Rafo's products abroad and over 1.5 trillion ROL (38 million euros) to various other agencies, including the Iasi customs authority and the Authority for State Assets Recovery (AVAS).

Rafo's fate is to be decided on November 24, when over 700 creditors in the loss-making company will meet to vote on the reorganization plan, which could save the refinery from bankruptcy.

Balkan Petroleum wants creditors to become shareholders. The current reorganization plan proposed by British Balkan Petroleum, the main shareholder in the two companies, proposes Rafo's merger with the synthetic rubber manufacturer Carom. "If the restructuring plan is to be voted and applied, the state will become the major shareholder with a participation of 62%, while the other shareholders will own around 38% from the new Rafo-Carom unit," according to Balkan Petroleum councilor Marin Anton said last week.

However, if creditors vote against the merger but agree to change the debt into equity, the Romanian state's participation in Rafo will top 49-50 percent.

Rafo was privatized in 2001 when Portugal's Canyon Servicos and Imperial Oil, controlled by controversial businessman Corneliu Iacubov, bought a 60% stake in the company for $7.48 million.

Balkan Petroleum became the refinery's main shareholder in 2003, when it acquired a 48.91% stake. Balkan Petroleum currently holds 97.82 percent in the Onesti-based refinery, of which it will control only 20 percent after the proposed merger with Carom. Rafo Onesti reported some 491 million euros in turnover with losses of about 160 million euros in 2003.

State takes over 120m euro debts from Termoelectrica

The Authority for State Assets Recovery (AVAS) will take over approximately 124 million euros in debts thermal plants belonging to local councils across the country owe to Termoelectrica, according to a government decision.

The decision to take over the thermal plants' debts was aimed at "clarifying and solving" the payment obligations for the credits that were contracted by Termoelectrica and then taken over by regional thermal power plants (CET).

At the end of September, there were 16 CETs awaiting overdue payments. At the top of the list of debts is CET Iasi, which owes 26 million euros, followed by CET Suceava with over 17 million euros in outstanding debts while thermal power plants in Timisoara, Pitesti, and Ploiesti, each have debts of around 15 million euros.

The arrears to be taken over by AVAS will be maintained in the account books of the thermal plants until the restructuring program of these plants is approved by the government. If the conditions of the restructuring plans are not approved by June 30, 2005, the debts will be recovered by forced execution.

Posted by Iulia Rasoiu : 11/17/2004 02:55:00 pm AVAS takes over half billion euro debts in Rafo and Carom
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