Uljanik is set to finalize the restructuring program

Uljanik, in collaboration with the selected strategic partner, Kermas energija, social partners, and the relevant ministry, is set to finalize the restructuring program that will be submitted to the Government for adoption, after which the program will be ready for consideration and final approval by the European Commission, Uljanik reported to the Ministry of Economy on Wednesday.

>>> Kermas energija selected as the strategic partner for Uljanik

The Ministry of Economy, Entrepreneurship and Crafts requested a report on the activities carried out in the process of selecting a strategic partner for Uljanik d.d. and information on the development and implementation of the restructuring program for Uljanik Shipyard, and published the complete report on its website.

On January 11 of this year, the Government granted Uljanik Shipyard a state guarantee for a loan in the amount of 96 million euros for the purpose of implementing the rehabilitation and financial consolidation process, and this decision received the approval of the European Commission (January 22).

The Ministry, in the justification of the report publication, also reminds that the Government’s decision conditioned the realization of the loan in such a way that the payment must be made in at least two installments. The first installment was used for necessary liquidity to ensure the production process, while the payment of the remainder was only enabled after the adoption of acceptable decisions by the Uljanik General Assembly related to the implementation of the restructuring program, i.e., after the adoption of decisions that allow the entry of a strategic partner into the ownership structure of Uljanik.

>>> Grbin: Restructuring Uljanik will result in 1,150 fewer workers, their existence needs to be ensured

According to the Government’s decision and the consent of the EC, this form of state aid in the form of guarantees for the rehabilitation loan does not represent illegal state aid if the loan is repaid within 6 months or if a sustainable restructuring program is developed during that period in accordance with the EC Guidelines on state aid for the rehabilitation and restructuring of non-financial enterprises in difficulty (2014/C249/01), the Ministry explains, reminding that the restructuring program must be approved by the European Commission.

Summary of the restructuring vision sent to eight addresses

The report from Uljanik is signed by members of the Management Board of the Pula shipyard, Veljko Grbac and Marinko Brgić, and it is evident from it that the summary of the restructuring vision was sent to eight addresses in November, that the data room was visited by seven potential strategic partners, and that social partners expressed “serious reservations regarding the offer from DIV Group.”

The report states that the Management, with the participation of consultants from the consulting firm BCG, presented the principles, foundations, and concept of the future restructuring program for Uljanik Shipyard to the Supervisory Board on November 10 of last year.

The Supervisory Board acknowledged the proposal for the restructuring program, supported the proposal for its implementation, obligated the management to present it to the Government, and recommended that special attention be paid to the social component in the case of implementation.

>>> Debeljak: Brodosplit submitted a ‘very, very valuable’ offer for Uljanik

Based on these decisions, Uljanik sent the so-called summary of the restructuring vision and further development of Uljanik Shipyard and Uljanik Group to potential investors in November 2017, for whom it was assessed that they might be interested and participate in the restructuring program, the report states.

It is also revealed that this document was sent to the addresses of eight potential investors – Fincantieri (Italy), Palumbo Group (Italy), Eusider Group (Italy), Erste bank d.d., Lagerkvist&Partners (Sweden), Studio Iovine (Italy), Kermas energija, and Bene Trade (Czech Republic).

All these entrepreneurs, in subsequent contacts, expressed their principled interest in participating in the restructuring process of Uljanik Shipyard and further development of Uljanik Group, emphasize the Pula shipyard.

They add that they also prepared a “Teaser,” i.e., a detailed overview of expected future events and procedures related to the restructuring of the shipyard and the future business of the group, which was sent to all mentioned entrepreneurs who expressed interest in receiving and analyzing it.

>>> The Uljanik Assembly ‘blessed’ the recapitalization, a foundation for avoiding liquidation

Uljanik reminds in the report that the extraordinary General Assembly of Uljanik d.d. on February 16, 2018, made a decision to increase the share capital and that the data room was open for potential strategic partners from February 15 to March 23.

The report also reveals that authorized representatives of seven potential partners – DIV Group, Kermas energija, Brodotrogir, Palumbo Group, Vergo d.o.o., Bene Trade, and Eusider visited the data room.

It is noted that there were no prior contacts with DIV Group and Vergo regarding participation in the restructuring.

Uljanik further states that by March 23, they received three binding letters of intent – Bond Asian Ventures from Hong Kong, DIV Group, and Kermas energija.

According to the report, social partners – SMH – Croatian Metalworkers Union – Industrial Union, SIKD – Union of Istria and Kvarner, and JS – Adriatic Union, are “thoroughly familiar with all initial interests and inquiries, the operation of the data room, and are aware that some interested parties withdrew from coming to the data room after the illegal strike on January 22-23, 2018, and the three received offers were presented to them in detail.”

>>> While Uljanik sinks into bankruptcy, Uljanik Plovidba increased revenues by 10 percent in 2017

The management of Uljanik also conveys that, given that the offers are conceptually different, “all three unions emphasized the importance of implementing restructuring as a process of common interest for all stakeholders involved with the primary goal of the sustainable operation of shipbuilding,” and that “all three partners expressed serious reservations regarding the offer from DIV Group.”

Kermas energija’s offer without additional conditions and unknowns

The Supervisory Board of Uljanik considered three binding letters of intent on March 28, and the report provides a brief overview of the received offers in one or two sentences.

It is stated that “since the offer from Bond Asian Ventures did not imply the restructuring of Uljanik Shipyard, and for the indicated financing model, it was necessary to realize undefined assumptions in the offer such as financing through loans to the company, such an offer leaves serious questions about the ultimate goal and the basis for implementing such an acquisition undefined.”

Regarding the offer from DIV Group, it is stated that it was “set up in such a way that before a clear conclusion about the scope and specific intention of the recapitalization of Uljanik d.d. and the restructuring of Uljanik Shipyard, it conditions the same with many previous transactions with other related companies of the Group,” noting that the Supervisory Board “was informed through discussion of the unions’ views regarding the offer from DIV Group.”

>>> Due to delays in the production process, Uljanik Group recorded a loss of 687 million kuna in 2017

“The offer from Kermas energija was assessed as the most adequate considering the primary strategic goal, which is the implementation of the restructuring of Uljanik Shipyard in cooperation with the Republic of Croatia, whereby there are no additional conditions and unknowns in operational terms, given that the shipyard urgently needs liquidity and stabilization of the overall business production process. In its offer, Kermas energija explicitly states that it is ready to implement the restructuring program according to previously defined criteria by the Management and all involved stakeholders, all in direct cooperation with the Republic of Croatia,” it is explained in the report.

The Supervisory Board concluded that the offer from Kermas energija, a company owned by entrepreneur Danko Končar, is significantly closer to the key elements and strategic goals of the restructuring program, whereby this offer implies “immediate involvement in the implementation of the restructuring process without additional conditions and requirements, all in the context of short deadlines and the need for liquidity and continuity of the shipyard’s production,” it is stated among other things in the report from Uljanik.