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State takes hard line on shipyard credit

Sunk in profitless waters, the Slovenské lodenice Komárno(SLK) shipyard has been stuck hard in negotiations with the Ministry of Economy on the guarantee of a 28.9 million DEM (578 million Slovak crowns) loan to stave off what would be potentially devastating job cuts.
According to the shipyard's management, the loan - which will be provided by SLK customers - can relaunch production at the shipyard and help the company avoid firing 995 employees. It would also keep the level of unemployment in the Komárno region, the company's home base, at the current 25.5%.
However, the government has slapped down conditions on the guarantee that will call on company management to finish current ship construction and put the firm back on a financially even keel. While state officials are loathe to see further job cuts at SLK, they say they need assurance that the funds will not be misused by management.


Protesting SLK workers can breathe a sigh of relief after the government agreed to a 578 million crown loan which will stave off additional job losses in a region already saddled with a 25.5% unemployment rate.
photo: TASR

Sunk in profitless waters, the Slovenské lodenice Komárno(SLK) shipyard has been stuck hard in negotiations with the Ministry of Economy on the guarantee of a 28.9 million DEM (578 million Slovak crowns) loan to stave off what would be potentially devastating job cuts.

According to the shipyard's management, the loan - which will be provided by SLK customers - can relaunch production at the shipyard and help the company avoid firing 995 employees. It would also keep the level of unemployment in the Komárno region, the company's home base, at the current 25.5%.

However, the government has slapped down conditions on the guarantee that will call on company management to finish current ship construction and put the firm back on a financially even keel. While state officials are loathe to see further job cuts at SLK, they say they need assurance that the funds will not be misused by management.

Building crisis

One year after the Kosovo war, which brought the activities of the shipyard to a virtual halt, SLK officials have said that the ensuing economic crisis in their company is on the verge of erupting. The shipyard started to fall behind its production plan in April 1999 when bombs dropped by NATO planes destroyed several bridges over the Danube River leaving ship-builders unable to deliver finished vessels downstream to the Black Sea.

Nevertheless, SLK still has the support of its customers who, despite the tough economic situation at the yard, want to help by providing some financial support for the troubled firm. As compensation for the injection they require a guarantee that would secure their loan.

SLK officials have pointed out that the only institution that can currently provide the shipyard with any form of a guarantee is the Slovak government. Management have said that Slovak banks have already guaranteed some past SLK loans but haven't seen any economic improvement in the company.

SLK general manager Milan Kopčok explained the situation: "If the government guarantees the loan, SLK will continue working on the construction of ships this month and avoid further job cuts." He added: "We also hope that the Danube River should be free for ships over the next three months which will undoubtedly accelerate the delivery and further production of ships and therefore improve the financial situation in SLK."

But in a move that has underlined the government's stated policy to get tough with managers of private firms who want help from the state, the Economy Ministry is demanding shares in the shipyard or equivalent coverage for its guarantee.

"Economic ministers, who have already discussed this guarantee, asked SLK shareholders to secure coverage of the government guarantee because SLK is a private company," said Economy Ministry spokesperson Peter Benčúrik. "However, the government will only guarantee money which will go into building of the three ships which are currently under construction."

In 1997 the ship-builder had total revenues of 3.2 billion Slovak crowns ($78 million), a figure which in 1999 dropped to 2.7 billion crowns ($66.5 million). The 1999 business plan envisaged construction and delivery of 14 ships, but only two were delivered to SLK customers. This contributed to SLK's 1999 loss of more than 700 million Slovak crowns ($16.1 million).

The Komárno region's industrial giant also had to fire 961 employees - a move which saw unemployment in the district jump from 19.74% to its present level of over 25%.

SLK currently employs 1,900 people. Further job cuts would, according to Roland Keťko, head of the Labour Office in Komárno, lead to a further rise in unemployment in the region to 33%.

He explained that current SLK shareholders [including the PSIPS investment fund (20.2%) the troubled IRB Slovak state bank (7.5%) and unknown investment funds like Park Real Dolný Kubín (19.6%), Danubia Invest (10.1%) as well as an unknown shipping company from Cyprus holding a 4.78% stake - ed. note], should realise that the shipyard can emerge from its current troubles only after the government guarantees ship construction.

"The current shareholders should support the proposals the government is coming up with. If they want a hen [SLK shipyard] to lay golden eggs they have to make a concession and agree with the government on the deal. SLK is a company with guaranteed future sales. The only thing which has to be solved is the production and delivery of their ships," Keťko said.

The Ministry of Economy proposed a 10.7 million DEM guarantee for SLK in December last year. However, SLK later started negotiations on a 48.6 million DEM (972 million crowns) guarantee for a loan. On April 5 this was cut to 28.9 million DEM.

SLK plans to cut its loss from 700 million crowns in 1999 to 200 million crowns ($4.6 million) in 2000 with revenues of 2 billion crowns ($46 million) and between eight and ten ships constructed.

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