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CREDITORS AGREE TO SELL TROUBLED FIRM AFTER UNION BLOCKADE AND PM'S PRODDING

Sale to breathe new life into PPS

LONG-SUFFERING engineering firm PPS Detva Holding may be saved from its predicted collapse this autumn after a court approved the sale of the bankrupt firm's assets on July 1.
The decision, handed down in Banská Bystrica regional court, clears the way for a consortium around Kremnica-based Sitno Holding to buy the beleaguered firm. PPS Detva Holding has been in bankruptcy since March 2002, since which time employment at the plant has fallen from more than 1,800 to 560.
After an aborted sale attempt in May, union representatives at PPS Holding warned that without an investor, the factory would not be able to pay its utility bills and would have to close before the end of the year.


PPS workers blockaded the local road to force a decision.
photo: TASR

LONG-SUFFERING engineering firm PPS Detva Holding may be saved from its predicted collapse this autumn after a court approved the sale of the bankrupt firm's assets on July 1.

The decision, handed down in Banská Bystrica regional court, clears the way for a consortium around Kremnica-based Sitno Holding to buy the beleaguered firm. PPS Detva Holding has been in bankruptcy since March 2002, since which time employment at the plant has fallen from more than 1,800 to 560.

After an aborted sale attempt in May, union representatives at PPS Holding warned that without an investor, the factory would not be able to pay its utility bills and would have to close before the end of the year.

"We have the chance to start again," said head of the PPS Holding union organisation Stanislav Ľupták after the decision was announced.

"I hope the history of the past ten years will never be repeated," he said.

Sitno, owned by former economy minister Ľudoviť Černák, says it can save PPS Holding through cooperation with Swedish carmaker Volvo, which has reportedly pledged to invest €1.3 million into PPS facilities and could increase the value of its contracts to €5 million once the plant is functioning under a new owner.

Officials from Sitno also say that they will be maintaining employment at current levels and could increase the number of work positions within the next 12 to 18 months.

The announced sale is a great relief to PPS Holding workers, who in late June blocked the main road between the central Slovak towns of Zvolen and Lučenec for two days in a desperate attempt to stave off the firm's collapse.

The protest ended after two main creditors recommended the sale of PPS following a meeting with Prime Minister Mikuláš Dzurinda. The creditors had previously objected to the sale due to ongoing legal questions about the bankruptcy, but Dzurinda urged them to press ahead, saying that judicial disputes were not an obstacle.

"[The creditors] should start acting in accord with state interests and save this factory with a long tradition in [the central Slovak] Detva [region]," Dzurinda said after talks with creditors and trade unions at the Cabinet Office.

"In practice it means that creditors should not seek complications or make incomprehensible speculations, but rather they must jointly pull the rope in one direction," he added.

By June 30, all four main creditors of PPS holding - social security provider Sociálna poisťovňa, the National Labour Office (NÚP), state health insurance company Všeobecná zdravotná poisťovňa, and the Slovenská konsolidačná bad-debt clearinghouse - were recommending the sale, after rejecting in late May two bids to buy the firm.

While the creditors then identified risks connected with ongoing court cases as the reason for putting off the sale, the low prices offered were also thought to be behind the decision.

The creditors said in April when announcing a tender for the sale of PPS Holding that they expected an offer high enough to settle most of the company's debt, of which courts have already acknowledged Sk770 million (€18.5 million) out of total claims of Sk2.8 billion (€67 million).

The tender, however, was cancelled in May, leading to the announcement of further layoffs at PPS Holding and angering trade unions and political leaders.

"I was astonished by the fact that all creditors were there when the tender was organized and suddenly, one step before its completion, they all started to question it," said Dzurinda.

With the court's approval, however, Sitno will have the chance to buy the firm for Sk150 million (€3.6 million), the same offer the company made in the April tender. According to PPS Holding bankruptcy trustee Vladimír Rybovič, Sitno has 10 days to pay the purchase price after signing the sale contract.

The collapse of PPS Holding has been a work in progress since the company's 1995 privatisation under the third term of former prime minister Vladimír Mečiar. The company, then called PPS Detva, was a major communist-era arms producer.

After running up huge debts at the company, in 1997 managers dissolved PPS Detva, transferring its assets to newly formed PPS Detva Holding and trying to transform the company's production from armaments to automotive components.

The new company, however, soon ran up huge debts of its own to insurance providers, banks, utilities, and suppliers. When Slovakia's Supreme Court in March 2002 challenged the legality of the 1997 asset transfer, PPS Holding's management resigned and the firm was forced into bankruptcy administration.

The troubles have also meant hardship for the Detva region, where PPS Holding is the largest employer. Unemployment in Detva stood at 20.1 percent at the end of May, compared to a national jobless rate of 14.8 percent.

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