Four interested in Romania's Oltchim privatization, debt-for-shares swap planned

Four investors have shown interest in Romania's Oltchim privatization: Russian TISE, Forte from the United Arab Emirates, Romanian Rompet Romgas and German PCC - already a minority shareholder in the company, according to Mediafax newswire. Romania should sell its entire share package in Oltchim, some 54.8 percent, with a first deadline set for April this year, according to the previous deal with the International Monetary Fund (IMF). The company is also near the top of list of state companies to have private management, together with Romarm and Hidroelectrica.

The state will negotiate with the potential investors based on price offers, the only criteria taken into account. The negotiation will be based on evaluation pointing to a EUR 300 million price tag for Oltchim, if the company receives raw material from Arpechim, currently owned by Petrom. Without the raw material supply contract, Oltchim's value is almost zero, reveals an official document quoted by Mediafax. Petrom said last year it was planning to close down Arpechim, after being unable to find a 'credible' buyer. The Romanian Government cannot buy the refinery, as the IMF blocked its intention to do so. However, the Government could establish a deal for transferring the refinery, but negotiations would be carried out between Petrom and Oltchim's future buyer. The buyer will have to further invest some EUR 682 million in technologies for the Râmnicu Vâlcea and Bradu platforms and EUR 374 million on the Arpechim platform. The Government plans to turn Oltchim's debts into shares and sell them to the future investors in the company. This would increase the company's social capital and dilute the stakes of minority shareholders that will not be able to put money down to keep their current stakes. The European Commission agreed with the move earlier in March, saying this does not represent state aid. PCC SE owns 18.3 percent in Oltchim, while Nachbar Services has 14 percent. Oltchim's total debt is around EUR 572 million, mainly for electricity, to banks and to the Authority for State Assets Recovery (AVAS). The debt to AVAS is of EUR 116 million, plus a similar amount in interest applied between 2007 and 2011. The debt stems from 2002, when AVAS took over Oltchim's debt to the Finance Ministry, after the state had issued guarantees for external loans taken by the company. “Ignoring the debt swap and trying to sell the share package only is the least favorable option, as it is less likely that any investor, except probably minority shareholder PCC, would agree to buy the shares without solving the debt problem. Even if someone expressed interest, the offered price would be very low,” reads the official document. With 3,300 employees and around 1,000 of them in technical unemployment, Oltchim has been posting losses in recent years. It ended 2011 with a loss of EUR 63.6 million, above the loss reported during the previous year- EUR 53 million. Karoly Borbely, State Secretary within Romania’s Economy Ministry was recently named president of the board for state-owned chemical producer Oltchim Râmnicu Vâlcea. Karoly Borbely replaced Constantin Dascălu, who resigned six months into the job.