Economic Policy Review ISSN 1313 - 0544

A Historic “Farewell” to Kremikovtzi AD

Author: Krassen Stanchev / 17.12.2009
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Amid the bustle of everyday affairs the economic observers are about to overlook one of the historically most important economic events - the fact that Kremikovtzi AD has somewhat silently headed for its liquidation.

This did not happen at the request of the Bulgarian creditors - a few state companies with a total share in the credit of around 70%, but because of the decision of more than half of the bondholders - with a total share amounting to the remaining 30%.

This happened in spite of the actions of the bankruptcy assignee and the person supposed to act as the official representative of those same bondholders, both of whom tried not to protect the interests of the creditors properly if one is to judge from the company's report and the statements in the press.

This happened in spite of the opinion prevailing among journalists that a reorganization plan for Kremikovtzi should be adopted.

This happened in spite of the explanation of the bondholders' representative, who attributed the event to the lack of support from the state. It was precisely the state's support that led to the present situation. Starting from the mid- to late 1960s, when Kremikovtzi was built contrary to the forecasts that it will not be profitable, and down to the opacity of the support for Kremikovtzi by Bulgargaz (energy) and BDZ (rail) as commodity creditors until a few years ago.

The historic importance of the event consists in the following:

  • This plant was intended to process subsidized Soviet raw materials, sell them at international prices and thereby refund Bulgaria's debt to the Soviet Union. The scheme failed but created additional economic monsters - one of them is Bulgaria's energy industry, which turned out to be unnecessary without a heavy industry and metallurgy;
  • There will no longer be anyone to drain the waters of the Iskar dam, as was the case in 1994, and no mayor will ever again have the opportunity to allow such a consumption of the water that belongs to the citizens of Sofia;
  • The air over Sofia feels notably better;
  • The liquidation scenario is a proof that the Bulgarian economy is fully integrated into the global one and that, even though the application of the law in the country might be distorted at times, the creditors' protection is working;
  • This is the first government which did not lapse into a sentimental mood regarding the inglorious 40-year history of the plant;
  • And last but not least - we are witnessing the disappearing of one of the monsters of the Soviet-Bulgarian fellowship and probably the most unreasonable structure in the Bulgarian economy, which corroded the whole system of property rights and economic governance.

Another historic process with an unprecedented scale will take place: the liquidation of Kremikovtzi AD might and probably will take place in a civilized manner and in the interest of all the creditors, including the workers. After 5-10 years a healthy business will evolve from the ruins of this plant, with revenues considerably exceeding the latter's present debts.