Bidders for Bulgaria's Largest Military Plant Required to Pay Off Its Debts

Industry | April 1, 2011, Friday // 18:19|  views

VMZ Sopot has debts amounting to BGN 140 M. File photo

Candidates applying to buy VMZ Sopot, Bulgaria's largest but troubled military plant, will be eligible to bid for it if they demonstrate they have enough funds to cover its mounting debts.

The evidence of the bidders' assets can be accounting documentation and bank account statements.

Another provision outlined in the strategy for the privatization of VMZ Sopot published Friday in Bulgaria's State Gazette is that the future owner of the plant will not be allowed to lay off workers in the first three years after buying it, with retiring employees being the only exception.

The initial version of the VMZ Sopot privatization strategy adopted by the Bulgarian Parliament only had a requirement that the future investor present a "social program" but without specific limitation regarding the number of employees.

The privatization strategy was later amended, primarily at the insistence of the rightist Bulgarian Socialist Party.

Thus, the bidders are expected to be able to cover all overdue debts of the VMZ Sopot plant, including delayed taxes, salaries and social security payments, totaling some BGN 140 M.

The future owner will be free to negotiate with the private creditors of the plant however they see fit.

The VMZ-Sopot factory is Bulgaria's largest defense industry plant and was once the pride of its military-industrial complex.

The potential investors will be offered 118 000 000 shares, or 100% of the capital of the company. Up to 20% of those, or 23 600 000 shares, can be paid for with non-cash means.

The largest Bulgarian military factor will be sold through a public tender. The bidders are required to accept the government's condition that VMZ Sopot cannot be declared bankrupt or ripe for liquidation for 5 years as of the date of acquisition.

The VMZ Sopot plant employs 3 700 workers. It is located in the town of Sopot in central Bulgaria, which is the birthplace of Bulgarian writer and poet Ivan Vazov, after whom it was named. The plant was founded in 1936, and during the communist period was developed into a large-scale military industrial unit.

VMZ Sopot produces anti-tank guided and unguided missiles, aviation unguided missiles, artillery ammunition, fuses. It also manufactures civilian products – it makes diamond tools, abrasive discs and grinding wheels, gas cylinders, food industry equipment, and household appliances.

VMZ Sopot has been in a troubled financial condition in the last few years. In 2007, Bulgaria's Privatization Agency started to sell some of the plant's assets in order to cover part of its debts; some of its assets were also sold at the beginning of 2009.

Over the years, several governments failed to decide on a strategy to privatize VMZ Sopot, and the Privatization Agency is said to be expecting a solution from the GERB government and the new Parliament dominated by them.

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Tags: Military-industrial complex, defense industry, VMZ Sopot, military factory, minority stake, state-owned, Defense Minister, Defense Ministry, privatization


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