Suing for damages
The SLK has also filed another lawsuit in connection with the Ruse privatisation, this one at the Municipal Court in Sofia. The company is demanding $320,000 in compensation for damages suffered as a result of the decision of the Bulgarian privatization agency. A trial in this case was to continue on February 25.
Although Bulgarian privatization laws stipulate that the Supervisory Board of the privatization agency has the last word on privatization decisions, the SLK claims that the agency violated the law through its actions. In Mihalik's words, the agency was supposed to start talks on the purchase contract for Ruse with the SLK as the winner of the tender. Since it did not do so, no issues could have arisen that would have given an objective reason for preferring the German company.
The Bulgarian State Privatization Agency sold the Ruse shipyard to a German customer despite the fact that the sales agent - the DFC consortium - declared the SLK to be the official winner of the international tender. Explaining the reasons for its decision, the Supervisory Board stated that the German Rousse Shipyard Beteiligungsgesellschaft is and will be a trade and production partner of the Ruse Shipyard, while other applicants in the privatization tender were Ruse competitors.
The privatisation agency said it was worried that the Bulgarian shipyard could lose part of its orders if it were purchased by a competitor.
But Martin Kábat, an analyst with broker Slávia Capital in Bratislava said that the Bulgarian decision had been a "mafia-style" move. "I think the people involved in the Ruse sale were reluctant to lose the company," he said. "Ruse is one of Bulgaria's biggest firms, and I'm sure the people involved in the sale saw a chance to continue to collect hard cash. Even if they looked bad in the eyes of the west, they thought it better to keep Ruse in their hands."
As for the success of the German company's bid, Kábat said that "they very likely invested some money in lobbying the people involved in the tender."
Terms of the contract
The Ruse contract involved 390,910 shares, representing 80% of the shipyard's registered capital. According to the sales contract, the buyer must pay 20% of the purchase price on the day the contract is signed, and turn over the remaining 80% within 45 days. The contract stipulates that the German company cannot sell the shares for the next three years.
The contract also obliges the buyer to invest $8.9 million in the company by 2003, as well as to maintain the current level of employment. The shipyard currently employs 1,300 people.
Based on the contract, the buyer must settle the shipyard's debt towards the state in a monthly installments amounting to 80,000 DEM. Representatives of the Bulgarian privatization agency refused to specify total sum of the debt.
1. Mar 1999 at 0:00 | SITA