Latvian shipping company sails off

  • 2002-01-24
  • Leah Bower
RIGA - Latvia's biggest privatization blunder is lumbering once more toward shedding its status as a cinder block around the neck of the state.

With a heavily tarnished image, the state-owned Latvian Shipping Company is facing its fourth attempt at privatization armed with a new set of regulations.

With attempts spanning the past four years, the last planned privatization went sour in spring 2001 when the only remaining strategic investor was rejected after missing the deadline.

The Latvian Privatization Agency last week approved a new method of transforming the company, one of the largest shipping firms in the world, from a state owned to a private joint-stock company.

"In previous attempts, the prices were set by the state's administrators, whereas in this one the sale value will be determined by a group of independent experts who will take into account the company's financial situation and interest shown by potential investors," said Kaspars Paupe, head of public relations at the Economy Ministry.

The new regulations stipulate that 51 percent of LASCO's share capital - 102 million shares - will be sold for cash on the Riga Stock Exchange while another 32 percent will be swapped for privatization vouchers, said Guntis Karklins, a representative of the privatization agency.

Ten percent will be designated for the state pension special budget without compensation, 6 percent will be sold to LASCO employees and pensioners for privatization vouchers and 1 percent will remain as the privatization reserve.

Sales for vouchers to employees are due to start in the next month, while [reparations for sale of the stock on the Riga bourse will take longer.

The stock exchange will first have to survey the company's condition, which will involve including conducting a legal and financial analysis to determine the maximum and minimum price of shares.

Once the groundwork is laid, bourse officials, LASCO executives and representatives from both the privatization agency and the Economy Ministry will hit the pavement in an attempt to drum up interest in the company.

Dates for auctioning the shares off at the Riga bourse will be set in the future by the privatization agency, which will hold the shares in trust for the meantime.

Rising again

Assuming enough interest has been generated in the LASCO shares - which is by no means certain - the privatized company will rise phoenix-like from the ashes.

In the week following the stock exchange results, the private company must hold a shareholders' meeting to elect a new board and council.

But LASCO President Andris Klavins thinks this plan could leave the state holding the bag.

If no international investment banks are interested, the process will be a failure and the state will be left with a large portion of shares while local investors won't be able to afford the minimum share price, he explained.

Ojars Kehris, a privatization agency council member and Latvia's Way party member, said the success of this privatization attempt rested solely on the bourse's sales abilities.

Past pitfalls

LASCO isn't a company with a good record for overcoming difficult business situations.

The last privatization plan pinned its hopes on a strategic investor, who would buy a majority stake in the ailing company. But when the pool of interested parties was whittled down to two, the requirement that they pay 5 million lats ($7.93 million) in collateral to continue to the next round caused both to balk.

One company pulled out of the negotiations completely, while the other - which negotiated to pay a lower fee - was later disqualified.

The privatization agency batted around a similar plan for the fourth privatization attempt, but eventually decided to go with the stock sales. But still the Economy Ministry is reluctant to describe one plan as superior to another.

"I think we cannot talk about a better or worse variant, but a different one," Paupe said. "During the previous attempts, opportunities were sought to attract strategic investors, and they fell through."

"But this time LASCO will be privatized with the help of financial investors."