In a tight spot. Gabriel Eichler, the new president of steel maker VSŽ, tells journalists of his plans for renewing investor confidence in the firm.photo: TASR
Gabriel Eichler, the new president of Slovakia's largest industrial company, steel maker VSŽ Holding, told journalists on December 18 that his biggest task over the next six months would be to stabilise the crisis-wracked giant. He admitted, however, that the company's every step would be dogged by a special bank committee set up to oversee VSŽ operations.
"My main role will be to stabilise the situation at VSŽ and to achieve the so-called stand-still agreement between VSŽ and the banks, as well as among the banks themselves," Eichler said. "This agreement will chart the further course of the company and its use of finances, while it will bring a promise from the banks that they won't use their rights [to recall outstanding loans with VSŽ] written into financial and loan contracts."
Eichler, the former president of Bank America, was elected at a extraordinary general shareholders' meeting on December 11. His nomination to the post followed weeks of uncertainty as to how VSŽ would dig its way out of a financial crisis the began when it defaulted on a $35 million syndicated loan on November 9.
Eichler said that the firm's creditor banks had set up a steering committee to oversee VSŽ operations. Every move affecting the company's assets, sales of its acquisitions and other important issues, he said, would be consulted with the committee.
Ellen Ledermann, vice-president of J.P. Morgan International in Prague, told The Slovak Spectator that such bank committees are an alternative to the banks' calling a cross default, which occurs when all creditors call in their loans after a debtor defaults. "Such agreements tend to occur when companies like VSŽ default, in situations where the company is viable but the banks want every decision to go through their hands for some time," she said. "The banks want to feel they have control and that things aren't being tunnelled out."
Ladislav Drábik, the new VSŽ chairman, agreed on December 26 that restoring the trust of creditor banks was key to the company's survival. "Banks need to be convinced that VSŽ is not a credit risk, and that they can expect to be paid," he said.
Ledermann said that the firm's choice of president would go a long way towards reassuring financial markets. "Eichler has good financial sense and good ethical sense," she said. "He is quite well liked, but he's not going to have an easy job at VSŽ. I'm sure there's a mess there, that people are scared and uncertain, and that the old guard will be putting obstacles in his way."
The president himself elected to tread softly at the December 18 press conference, claiming that "I am not going to look into the past, I'm not going to look for those responsible for the current situation, or even ask why VSŽ is in such a critical and dramatic situation. I'm going to look to the future and stabilise the company."
Eichler said his first step in stabilising the steel maker would be to restructure the company's 13 billion Sk ($35 million) in loans. To achieve this goal, he said, the company had to adopt a development strategy that focused exclusively on metallurgy.
Since 1995, VSŽ has been investing in non-core activities like sports teams, banks and newspapers. But the firm's 1998 financial woes, caused in part by plummeting steel prices on world markets, have forced it, in Eichler's words, "to concentrate solely on metallurgy." On December 30, VSŽ spokesman Jozef Marko announced that Národná Obroda, a national daily paper owned by the firm, was already on the auction block.
Eichler said that the prompt stabilization of VSŽ was a prerequisite for the firm to launch its biggest 1999 investment - the construction of a zinc-coating line at a price of 6.8 billion Sk that was to be launched in January in cooperation with U.S. Steel.
SITA, TASR and Národná Obroda contributed to this report.
