Bidders continue to tangle over fiber plant

  • 2000-02-10
  • Valters Medenis
RIGA - The French company Rhodia is currently prepared to invest over 14 million DM ($7.5 million) into the insolvent Tolaram Fibers plant in Daugavpils, but cannot get into the door.

Rhodia which produces poliamides (nylon 6&6), and which has plants in other European countries including newly acquired plants in both Poland and Slovakia, met Feb. 7 with the Latvian Ministry of Finance to discuss its failed bid to takeover the management of the insolvent factory.

With no solution stemming from this meeting, Rhodia will have no choice but to look elsewhere and this could be great loss in exports to the ailing Latvian economy, said its Baltic representative.

Jeane Claude Lordereau hoped to discuss with the ministry Rhodia's financial plan and the possible restructuring of debts incurred by the insolvent plant.

Rhodia was originally contacted in July 1999 to become a candidate in restarting the Tolaram plant in Daugavpils. Because of purchasing activities in Poland and Slovakia, Rhodia did not put forward an offer for the Daugavpils plant until Oct. 5 following an extensive audit of the plant currently leased to the company Stalkers. Rhodia's offer was valid until the Nov. 15. and still to this date Lordereau has not received a reason its bid was refused.

Rhodia was also excluded from participating in an Oct. 8 meeting of the selection committee headed by Lidija Skreja, appointed by the court to handle the affairs of the insolvent Tolaram Fibers. Skreja has said that all bidders of the lease of the plant were informed of the meeting but Lordereau said no contact was made to his office or company.

In Rhodia's bid, the company offered to manage the whole plant while signing a lease to exploit only the Teijin unit to manufacture poliamides. Rhodia's offer said they would employ 120 people and indirectly another 120 staff members. Lordereau said Rhodia's knockback of the takeover is purely a political one by the Daugavpils Municipality as Rhodia's offer will cause approximately 750 staff to be terminated at the plant. According to the company Stalkers there are currently 1,760 employees. In Rhodia's offer, they showed an employee base of around 600-800 employees, with plans to gradually increase the number to around 1,000-1,100 when the plant starts operating to full capacity.

Currently the only financially viable work occurring at the Tolaram plant is the manufacturing of women's stockings and undergarments. The plant, according to Rhodia, is also badly in need of maintenance and to produce poliamides hot water is essential.

"I cannot understand how a company such as Stalkers can run a plant successfully when they lost the backing of the Latvian bank Unibanka and figures which we have received in November 1999, show that they were insolvent," Lordereau said Rhodia has also received an offer of interest from the company Magistr of Daugavpils wanting to use the rest of the plant to manufacture textiles.

With the French company's willingness to invest 7 million DM($3.78 million), and up to 15 million DM($8.1 million), into Latvia's second largest enterprise to begin initial production, Lordereau said, "I can not understand the unwillingness of Latvian administrators and municipalities to give a Western company with a viable financial plan the respect of at least an explanation of the rejection."

Rhodia is currently the largest manufacturer of poliamides in Europe and second largest globally. With this solid base of sales and production, Rhodia's Baltic delegate sees this could possibly be a great loss to the Latvian economy. He said that the company obviously has the sales to meet initial production, otherwise Rhodia would not be interested in the Daugavpils plant.

The company Stalkers on the other hand is planning to invest up to $23 million over a period of two years and is hoping when a meeting of the creditors occurs in Daugavpils on Feb. 11, that the company Tolaram Fibers will be voted bankrupt and that Stalkers' bid to run the plant will be successful.

The Daugavpils Municipality board will push for the insolvent company to be declared bankrupt said Daugavpils Municipality director, Ricards Traba. The town does not want to see any jobs being lost.

"Currently the company Stalkers has been paying their bills, and with another 1,000 jobs being created for the community, we would not like the plant going to another company," said Traba.

Stalkers at the moment has an agreement to run the plant without paying off previous debts of $24 million incurred by Tolaram Fibers.

Rhodia will be hoping that its meeting with Latvian Ministry of Finance will resolve the issue of their tender of the Teijin unit and management of the insolvent Tolaram Fibers plant. If nothing concrete can be resolved at the meeting, they will have to search for another plant in Europe to meet their demand for production on the world market, Lordereau said.