Debt collection process commences at Rigas Kugu Buvetava

  • 2019-02-23
  • LETA/TBT Staff

RIGA - Several bailiffs have started a debt collection process against the joint-stock company Rigas Kugu Buvetava (Riga Shipyard) over the company's outstanding debts to its creditors, Rigas Kugu Buvetava informed Nasdaq Riga stock exchange.

The company points out that currently it has difficulties in fulfilling of its obligations, but this is mostly due to lack of the working capital.

One of the main factors contributing to the current circumstances and the lack of working capital is situation in the financial sector of Latvia, Rigas Kugu Buvetava points out.

"Unfortunately, in Europe and especially in Scandinavia, there is a great deal of disrespect for Latvia's credit institutions - mainly with local capital. It was followed by a decision of the customers not to accept the guarantees issued by Latvian credit institutions as collateral, and as a result of the customers' uncompleted investment portfolio the company has lost multi-million euros worth orders in recent years," says Rigas Kugu Buvetava's statement submitted to Nasdaq Riga.

Consequently, the company was forced to discontinue the provision of shipbuilding services which so far ensured the adequacy of working capital, particularly during the winter period, when ship repair services are not provided and the docks are staying idle.

Under the circumstances, restructuring measures were carried out and as a result current monthly operating expenditure is considerably reduced - even by more than 60 percent, but such a reduction has been also achieved due to some unpopular measures, like terminating the employment relationship with the majority of the employees of the company, unable to provide regular wage payment, and attracting more subcontractors for the provision of ship repair services.

On May 28 last year, the Riga Vidzeme District Court resolved to initiate legal protection proceedings of Rigas Kugu Buvetava, what at the opinion of the company was the right step to get out of the complex conditions that have arisen under the influence of various circumstances, and whose sole purpose was to preserve the company's activities, the work profile and to re-establish the situation, allowing to fulfil its obligations and to ensure further development of the company, but application for legal protection proceedings of the company, without even examining the merits, was rejected and case of legal protection proceedings was dismissed.

Due to outstanding indebtedness sworn bailiffs, on the basis of enforcement documents, have commenced enforcement measures for the collection of debts related to the tax debt to the State budget, unpaid wages and liabilities towards the company's service providers.

As a result, sworn bailiffs are organizing auctions of two properties of Rigas Kugu Buvetava, and an auction to sell 730 shares in company Remars Granula, which belongs to Rigas Kugu Buvetava, in order to settle the company's debts to Latvijas Gaze natural gas utility and debts to former employees of Rigas Kugu Buvetava.

The company points out that auctions organized by the sworn bailiffs for the alienation of real estate or capital shares will not affect the economic activities of the company, since the properties are rented out to the tenants and not being used in the daily economic activities of the company.

Similarly, the auctions will not affect Rigas Kugu Buvetava's financial statements and the total value of its assets, since the real estate values in the balance sheets in accordance with the company's accounting system data are below their initial auction prices. In addition, the company has been trying to sell assets related to Remars Granula, but unsuccessfully.

Notwithstanding the aforementioned measures the company currently continues its daily economic activities and is determined to re-establish its activities, thereby ensuring the stability and competitiveness of the company, as well as the fulfilment of its obligations towards its creditors.

Rigas Kugu Buvetava 's audited turnover in 2017 amounted to EUR 12.853 million, 38.1 percent down from 2016, and the company posted EUR 308,216 in losses as compared to a profitable 2016.