VILNIUS - The government announced on Feb. 26 that it would sell its majority stake in Alytaus Textile, a troubled manufacturer that has been unable to turn its operations around since being renationalized three years ago. The government's strategic planning council asked the State Property Fund to put together a draft sale proposal, with an aim to sell the state's 69.56 percent stake within two months.
Last week there was speculation that the government would continue to prop up the ailing enterprise by increasing capital, which it is allowed to do by EU law, but ministers decided against the idea.
Alytaus Textile is saddled with debt 's 42 million litas (12 million euros) 's and CEO Valdas Araminas has said the company would need a cash injection of some 35 million litas in the nearest future in order to survive. He said the hope was to procure 30 million from the government and the remainder from banks.
However, if capital was increased through a stock issue, and the government subsequently bought but minor shareholders didn't, the European Commission could regard the deal as a state subsidy, government officials said.
"The Competition Council is of the opinion that the European Union may not allow us to do this for a second time. Some lawyers do question that," Prime Minister Gediminas Kirkilas told reporters last week.
Alytaus Textile received some 28 million litas in various forms of state support under the previous revival plan.
Rimantas Stanikunas, chairman of the council, told the Baltic News Service, "The problem is that the aid was granted to the company under a special law during the transition period, in the spring of 2004, when Lithuania was admitted to the EU. So it is not clear if the European Commission would treat [a new injection of capital] as aid."
In January Economy Minister Vytas Navickas told the government that putting Alytaus Textile into bankruptcy was one possible option.
Opinions differ as to whether investors would be interested in the asset. Gintautas Andriuskevicius, a former CEO at Alytaus Textile, does not think so, BNS reported. Kirkilas, however, said investors are already showing interest.
The Boras Wafveri Group, a Swedish conglomerate, reportedly said in November that it was interested in buying the company. A few years ago the group attempt to take over Alytaus Textile.
Boras President Thomas Wildstrand was quoted as saying that the group would consider buying the ailing company if the offer were "very attractive." Considering Alytaus Textile's dire situation, the Boras Wafveri Group will put in an aggressive bid and try to buy the company for a symbolic price.
The state took over the company after the cancellation of a privatization agreement with the Tolaram Group, a Singapore-based company, since the latter failed to meet its investment obligations.
Still, in the three years under the state's stewardship, the company failed to put the bottom line in the black. Finally, in December two of the company's top executives resigned due to alleged differences with the Economy Ministry, which is the nominal owner of the state's stake.
Alytaus Textile produces hundreds of products, from a full range of yarn to finished fabrics.
The company posted losses of 16 million litas in 2005, while 2006 results have yet to be announced.
