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Slovak Telecom's credit questioned

The state telephone monopoly Slovenské Telekomunikácie (Slovak Telecom - ST) is expected to sign a syndicate loan worth $100 million over five years with the American Citibank by the end of October, ST spokesman Ľubomír Stancel said on October 5. But the situation may not look as wonderful as ST would like. Ivan Matušík, a private businessman, has accused ST of breaching a contract that secured him the exclusive right to publish phone directories. He intends to make ST's credit look bad to Citibank. "ST is not a reliable business partner, they do not keep the contracts they sign,'' Matušík said. "How can the bankers be sure they will get all their money back?''

The state telephone monopoly Slovenské Telekomunikácie (Slovak Telecom - ST) is expected to sign a syndicate loan worth $100 million over five years with the American Citibank by the end of October, ST spokesman Ľubomír Stancel said on October 5.

But the situation may not look as wonderful as ST would like. Ivan Matušík, a private businessman, has accused ST of breaching a contract that secured him the exclusive right to publish phone directories. He intends to make ST's credit look bad to Citibank.

"ST is not a reliable business partner, they do not keep the contracts they sign,'' Matušík said. "How can the bankers be sure they will get all their money back?''

In late September, Matušík's lawyers contacted Citibank International plc. and handed over legal documents about ST's creditors suing them for an absurd, yet real fine worth over 10,000 billion SK. A Citibank official who requested anonymity said that a Coopers & Lybrand audit of ST, provided in August when ST was negotiating the loan, did not include any information about ST debts.

"We certainly will pay attention to the outstanding litigation,'' theofficial said. "Everyone is taking a fresh look at it now."

He said Citibank will rely on the auditor's view on the possible impact of the litigation. The prospective syndicate loaners will get an "overall story on the credit of the company.''

Legit or not

Matušik's firm Harold Business Data Slovakia s.r.o. (HBD), signed a contract to have an exclusive right to print phone books for the ST customers back in 1990, which later was amended in 1992. A clause defining severe sanctions for the side that would not keep the deal, was added to the contract: fine of 500 SK per day, and the amount would quintuple every three months it wasn't paid.

Matušik says it was ST who introduced the clause, "probably to get us, if we didn't deliver the phone books on time.'' Ivica Kolesarova from ST's legal department was not sure, who was the actual author of the clause. However, it was Matušik, who decided to use the clause back in 1995, after ST stopped supplying him with data necessary to print the directories.

According to Matušik, ST deliberately violated the agreement. He said he tried to settle the matter in August with +++ Skultety, ST's lawyer, but Skultety declared the ST did not consider the original contract with the HBD valid, and therefore refused to pay attention to Matušik's complaints.

But Matušik insists that the contract was valid citing the fact that he created five phone books under the agreement. In the August 1994 edition of the Bratislava phone book ST division director Jozef Smatlak and Jan Benka, director of HBD signed thier names under this statement:

"This directory is a significant move of the publisher, introducing a new project of phone directory publishing in the Slovak Republic, that aims to provide the public with high quality information and media to advertise.''

Matušik claims he is not after the money. "I do not care to get the fine, I know currently it would be an absurd amount of money,'' he said on September 30. He said he would have been satisfied only if the people from the ST were just able to şşgo out and have a beer and settle the problem like normal people.''

"I just want to print phone books. I like this business,'' Matušik said.

Yet, in January 1996, when the alleged debt - then worth over 500 billion Sk - exceeded the equity capital of ST, the district court in Bratislava approved that ST should enter a special regime prior to the bankruptcy, which would mean a board of creditors would supervise and approve ST's activities until the debts were paid back.

Otherwise, the company would go bankrupt. ST ignored the court's decision, claiming the contract with Matušik's company was never valid.

In May, a district court in Bratislava ruled after a one day session, that HBD's contract with ST was invalid. Matušik appealed to the higher court and certain of his eventual victory "if the judge is good and respects the law."

New player

In April, Matušik sold 112 million of the ST debt to Jozef Majsky, one of the richest Slovak businessmen, who is far from friends with the current ruling coalition of Vladimír Mečiar. Majsky is bold about his plans - capitalizing on his assets, he wants to become a co-owner of the ST. However, for that, he would need an approval of the government, because ST is a state company. August 20, the government denied Majsky's request to start a bankruptcy procedure against ST.

And, to make sure Majsky and other (foreign) ST creditors could not cause any more trouble, the ruling coalition passed an amendment to the bankruptcy law, excluding all strategic state companies, including ST, from bankruptcy. Coalition deputies boldly admitted the move was to avoid Majsky's chances to become an ST co-owner.

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