The only steel mill in the Baltics States JSC“Liepājas Metalurgs” – from the insolvency process to new owners
On the 12th of January, 2015, the insolvency administrator of "Liepājas Metalurgs" Haralds Velmers handed over the symbolic key to the newly established company "KVV Liepājas Metalurgs" board member Igors Kovaļenko. With this event the company's factory was sold, as well as the company's rescue mission was accomplished, in which Prudentia had been involved since 2013.
Because of the continuously falling price of steel in Europe, in 2013, the only steel armature manufacturer in the Baltic States - privately owned JSC "Liepājas Metalurgs" - faced a sharp increase in its net losses. What made the situation worse was the LM's obligations that exceeded 200 million euros at that time and part of it was state guaranteed. Initially Prudentia was attracted to represent the Creditor's Club (incl. Financial creditors – Latvian State, bank Citadele and SEB Bank, and two biggest suppliers - Latvenergo and Stemcor) by performing a detailed analysis of the company's business activities, communicating with the involved parties and developing a strategy to maximize the creditor protection, who`s total claims exceed 141 million euros. To gain the legal protection of the company, the involved parties went to court, however, the owners could not agree on a possible solution with the creditors and the company was announced to be insolvent. Afterwards the insolvency administrator, through competitive process, attracted Prudentia to become the consultant in selling the company's assets, including the plant.
The process from attracting new investors till closing the deal took unusually low amount of time (taking into account the size of the deal), due to the following factors - the good preparation work by Prudentia's team and ability to address international steel industry specialists by using the Global M&A partners' network. In the acquisition process there was a great competition made among the investors, which increased the acquisition price more than twice to compare with the initial offer. Additionally, the payment terms and guarantees satisfied the creditors and the deal was closed. In only 9 months time from the beginning of investor attraction process the plant was sold for a record amount of 107 million euros, which made it the largest deal in the Baltic States in 2014.
Ivars Pinkulis: The acquisiton of "Liepājas Metalurgs" was the largest deal of 2014 in the Baltic States.
Prudentia's team was initially involved in the JSC "Liepājas Metalurgs" rescue plan and later in the sale process, which in total took 2 years of devoting their human resources to offer fast yet credible services to the creditors and the insolvency administrator. This is a very unique case in the history of Latvia, because there have been no equivalent situations before when such a large company has been saved from being insolvent and has been sold to new investors in such condition that it can restart working immediately.
Through successful coordination of creditors, company's management and the attracted legal office we were able to find solutions to meet the requirements of the insolvency process and at the same tome to create an attractive investment opportunity for the international investors.
The well-organized investor attraction process allowed us to receive more than 10 non-binding offers, and negotiate a higher price with the most favorable payment terms.