Nikolai Lovtsov, who started PAS Gutta in 1994 and owns the
controlling interest in the company, could not be reached for comment
by the Baltic Times deadline. He earlier told the Latvian news agency
LETA that his resignation Dec. 1 was "linked to creditors."
Lovcovs was temporarily replaced by Patrik Mossberg, who has worked
for Gutta's largest creditor, the Latvian unit of the Swedish-based
packaging company Tetra Pak.
Mossberg said that Lovcovs resigned without any legal action from the
creditors and that a permanent new management would be put into place
in "the very beginning of next year."
"The company needs to be restructured," Mossberg said.
Mossberg said that Gutta had overinvested in production capacity and
was unable to cope when sales dropped as a result of the Russian
Gutta now owes 2 million lats ($3.45 million) to Tetra Pak, primarily
for rent on equipment, according to the company's 1999 financial
report; Gutta had also amassed more than 4 million lats in short term
debt to financial institutions, mainly Hansabanka and Latvijas
Unibanka, according to the report.
Unibanka has turned over its interest in Gutta to the other
creditors, Mossberg confirmed, though the terms remain confidential.
Just a year ago, Gutta was a success story. The company was growing
rapidly and had seized more than 20 percent of the Baltic fruit juice
market. Gutta was planning to extend into the Russian market and had
scheduled the opening of a plant in the Moscow suburbs for this
Most important of all, Gutta had negotiated a 12 million euro loan
from the European Bank for Reconstruction and Development. The
agreement, signed last November, was the EBRD's biggest in Latvia's
consumer products sector.
The only problem: Gutta never met the conditions on the EBRD loan,
and the loan was never delivered.
In the meantime, Gutta's Lovcovs had used the promise of EBRD money
to put the company deeper into debt with short term financing
intended to bridge the gap before the EBRD loan, according the
Unibanka executive who handled the Gutta account.
"We were told that the EBRD loan was coming in and that we would be
repaid," said the executive, Gustavs Eglitis.
Eglitis said that Latvian loan agreements usually run one or two
pages, while international agreements can be 40 pages long.
"Local companies are not used to working with that kind of
sophisticated agreement," he said.
Gutta "probably thought that once both parties had signed that the
financing was in place," Eglitis said.
The EBRD would not comment on Gutta's current situation but noted
that while Gutta has not yet met the conditions of the loan
agreement, the offer is still formally open.
For now, Gutta remains in transition, and the Moscow plant opening is
in doubt, Mossberg said.