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CREDITORS' REJECTION OF BIDS FOR PPS DETVA HOLDING MAY BRING END TO STRUGGLING FACTORY

No sale means more misery in Detva

THE WOES at bankrupt engineering firm PPS Detva Holding deepened in late May when the firm's four main creditors rejected two bids to buy the concern, leading workers to fear that the long-suffering company will not survive another winter.
Another 150 of the firm's 560 remaining employees are set to be laid off starting in July, and union leadership says that unless an investor is found, PPS Holding will collapse. Legal wrangling and a year of bankruptcy have already caused painful cuts in the company, which employed 1,800 people in March 2002.
PPS Holding is the largest employer in the Detva district of central Slovakia, which had an unemployment rate of 22 percent in March 2003, compared to the national rate of 15.4 percent.


PPS HOLDING union head Stanislav Ľupták delivers the bad news to workers outside Banská Bystrica regional court.
photo: TASR

THE WOES at bankrupt engineering firm PPS Detva Holding deepened in late May when the firm's four main creditors rejected two bids to buy the concern, leading workers to fear that the long-suffering company will not survive another winter.

Another 150 of the firm's 560 remaining employees are set to be laid off starting in July, and union leadership says that unless an investor is found, PPS Holding will collapse. Legal wrangling and a year of bankruptcy have already caused painful cuts in the company, which employed 1,800 people in March 2002.

PPS Holding is the largest employer in the Detva district of central Slovakia, which had an unemployment rate of 22 percent in March 2003, compared to the national rate of 15.4 percent.

"Because a decision [to sell the firm] was not reached, the layoffs that were announced will certainly take place, and we are afraid they will not be the last," said PPS Holding union head Stanislav Ľupták.

"We are deeply afraid - we know that when the heating season starts, the business will have to cease functioning," he said.

PPS Holding was offered for sale in an April tender, with only two of the original group of six parties offering final bids. Both bids were rejected on May 27 by creditors concerned over continuing legal issues at PPS Holding, and that the offers were lower than the company's real value.

The two bids, of Sk160 million (€3.8 million) and Sk65 million (€1.6 million) by Japanese engineering group Sinto and Bratislava-based ISKO respectively, fall well below the company's Sk500 million (€12.1 million) book value, and creditors in April said they expected an offer high enough to settle most of the company's debt.

Courts have already acknowledged debt claims of Sk770 million (€18.7 million) out of a total of Sk2.8 billion (€68 million) against PPS Holding, and creditors estimate the company's assets at Sk1.2 billion (€29 million). The company also still owes employees more than Sk50 million (€1.2 million) in unpaid wages from early 2002.

After rejecting the sale, the four largest creditors of PPS Holding - social security provider Sociálna poisťovňa, state health insurer Všeobecná zdravotná poisťovňa, the National Labour Office (NÚP), and the Slovenská konsolidačná bailout agency - said their decision was based more on legal questions regarding the bankruptcy than on the prices offered. Together, the four represent two-thirds of the claims against PPS Holding.

The court disputes go back to the 1997 founding of PPS Detva Holding, created in order to transfer assets from heavily indebted communist-era armaments manufacturer PPS Detva, which was privatised in 1995. Although PPS Holding tried to transform the company from an arms to an automotive-component maker, the firm soon ran up a host of new debts to insurance providers, banks, utilities, and suppliers.

By spring of 2002, workers at PPS Holding were not receiving pay cheques and were working in unheated facilities because the company had defaulted on utility bills.

When Slovakia's Supreme Court in March 2002 challenged the legality of the 1997 asset transfer, PPS Holding management stepped down, unpaid workers began a series of strikes, and the firm was forced into bankruptcy administration.

The bankruptcy management, headed by trustee Vladimír Rybovič, is involved in another dispute with Danish company Green Welt. Its subsidiary Green Welt Slovakia says it is the owner of two-thirds of PPS TSN, a profitable subsidiary of PPS Holding, but that the bankruptcy trustee has been blocking its ownership rights.

According to PPS TSN management, Green Welt Slovakia injected Sk5.4 million (€131,000), the maximum allowable, into the firm last autumn, increasing its basic capital by two-thirds. The capital increase, they say, was approved by PPS Holding directors in May 2002, and later entered into Slovakia's commercial registry.

Rybovič, however, filed suit in Banská Bystrica regional court that the shareholders' meeting that approved the capital increase was not valid. His case was dismissed, but a pending appeal to Slovakia's Supreme Court has meant that no one is now sure how much capital or how many shares exist in PPS TSN.

In late April 2003, Rybovič approved the sale of 2,700 shares of PPS TSN to Sinto Holding, but neither buyer nor seller could say whether the stake represented 100 percent of the company or 33 percent, as Green Welt maintains.

Uncertainty in the PPS TSN case relates to the desire of creditors to sell PPS Holding as a whole, rather than dealing off its component parts. Creditors assume that selling PPS Holding as a unit will allow them to fetch a higher price while still maintaining employment and production figures.

"We want to meet with the management and with the largest [clients] so that by the time the legal problems with selling the business as a unit are solved we can more simply take every step and can maintain employment," said Sociálna poisťovňa spokesperson Eva Kopasová.

Creditors have also dismissed worker complaints that nagging doubts over PPS Holding have caused the company to lose orders, and that without an owner the firm is unable to work out new contracts.

"In our negotiations, foreign and domestic business partners are willing to continue cooperation. If production doesn't decline, there is no reason to lay people off," said Anna Tökölyová, head of the NÚP's receivables department.

Workers at PPS Holding remain doubtful, however, and have called for parliamentary investigations into Sociálna poisťovňa and NÚP.

While labour leaders say they will take several weeks to consider their next step, they believe that the chances of fetching a higher price for PPS Holding than those offered are slim.

"If the business stops producing, the hall and the technology without the people will be very hard to sell," said Emil Machyna, head of the OZ KOVO national engineering and metallurgy union.

"It is much better, and more lucrative, to sell a living business than to sell something that simply doesn't function, and that is our goal," said Machyna.

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