Commission launches state aid probe with
respect to Polish steel company Huta Czestochowa, Brussels, 19 May 2004
The
Commission has doubts that the restructuring of Huta Częstochowa has been
achieved without state aid. It is seeking clarification whether and what kind
of state aids will have been granted up to 2006.
Protocol
No. 8 of the Accession Treaty on the restructuring of the Polish steel industry
prohibits the granting of restructuring State aid to companies not included in
it. Poland did not include Huta Czestochowa in Protocol No. 8 of the Accession
Treaty as a beneficiary of restructuring State aid.
The
Commission has doubts whether the current operation of the steel production at
Huta Częstochowa is achieved without state aid.
In
addition, the Commission has doubts whether the restructuring of the company
meets the private creditor test. The current restructuring plan raises the
impression that the winding up of the company was avoided by convincing the
commercial creditors to agree to a restructuring plan. It appears that State,
although in the possession of pledges on the steel assets, did not request
liquidation but agreed to write off parts of its debt, the precise amount of
which will only be established after the realisation of the sale of assets in
the future.
The
current probe is however not directly related to the sale of the shares of the
steel production assets of Huta Częstochowa. This may only be of relevance
in so far as the transaction risks involving the transfer of state aid between
Polish steel producers, in so far as it is prohibited by Protocol No. 8 of the
Accession Treaty
Background
Huta Częstochowa,
is the second biggest Polish steel producer. Because of its financial
difficulties (all its assets were pledged) the Restructuring and Development
Plan for the Polish Iron and Steel Industry envisaged restructuring the company
by means of bankruptcy . Therefore, the company was not included in Protocol
No. 8 of the Accession Treaty as a beneficiary of restructuring State aid.
Subsequently,
Poland decided to endorse a restructuring plan for Huta Częstochowa
pursuant to the Act on Public Aid for Entrepreneurs of Significant Importance
for the Labour Market, which gives companies protection against liquidation
during restructuring. In the opinion of Polish authorities this plan will yield
a better return than liquidation.
The plan
allows the splitting up of the company into several entities. While one of
these entities will own the steel assets, several other companies will receive
the remaining assets. The state, although in the possession of pledges on the
steel assets, will be given one of the latter entities and will then try to
recover its debts over time. On the other hand, the steel assets, which are
about to be sold to a strategic investor, will be given to the commercial
creditors who will swap their debt for equity and then sell the shares.
Furthermore,
in order to continue operation of the steel production an operating company was
formed by a state owned agency. It leased the steel assets and took over the
employees.