Bulgaria Bankrupt Steel Mill Sale 'Good News'

Kremikovtzi steel mill, the sprawling communist-era behemoth near Sofia, was declared bankrupt and cleared for liquidation after years of struggle with dire economic conditions and controversies over mismanagement and draining. Photo by Sofia Photo Agency

A former adviser of Bulgaria biggest steel mill bondholders has hailed the sale of its production assets despite the controversy surrounding the buyer.

"This is good news for all involved," Krasen Stanchev, chief executive officer of the KC2 consultancy firm and a former adviser for some of the bondholders, told Bloomberg agency by phone.

"If properly managed, Kremikovtzi can generate net income of some 20 million euros a year for the next four years by processing scrap."

Bulgaria finally sold on Tuesday the production assets of Kremikovtzi steel mill in a fourth auction to a newly established local company, owned by 26-year-old Lachezar Varnadzhiev.

The sale price was BGN 316 M (nearly EUR 162 M).

Eltrade company paid a 31 million lev deposit and is obliged to pay the balance of the full price by April 18.

The buyer declined to reveal what he plans to do with the plant just outside the capital Sofia.

"Eltrade company" is established on March 8 2011 and its capital is a mere BGN 20 000, a check in the Trade Registry shows, triggering suspicions who stays behind it. It is Varnadzhiev's only company and it is supposed to be a black and colored metal dealer.

"Eltrade company" has the same address as Nadin - N, a well established scrap dealer. Vladimir Todorov, member of Nadin – N's board of directors, was present at Tuesday's auction.

The first two auctions of Kremikovtzi failed to attract any bidders last year. The price started at BGN 565 517 510, which according to trade unions and analysts is far below the market price.

The third tender for the mill's production capacities was held in February 2011, but fell though after the sole prospective bidder failed to submit a deposit.

The smelter shut down some of its furnaces in 2009 due to lack of raw materials after Ukrainian tycoon Konstyantin Zhevago canceled a deal with the plant.

It was previously owned by Pramod Mittal, the younger brother of ArcelorMittal Chief Executive Officer Lakshmi Mittal.

The mill was placed in receivership in 2008  and following failed attempts to sell it to ArcelorMittal and Konstantin Zhevago, it was declared bankrupt.

The sprawling communist-era behemoth near Sofia was declared bankrupt end of May and cleared for liquidation in June, after years of struggle with dire economic conditions, and multiple controversies about mismanagement and financial draining. In a high profile case, Alexander Tomov, former CEO of Kremikovtzi and Bulgarian football great CSKA, faced trial.

At the end of January this year Tomov was sentenced to nine years in jail by a Sofia city court for selling off plots of land owned by Kremikovtzi at well below the market price.

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