But after auctioning off a 51 percent stake in LASCO, most of it to the oil firm Ventspils Nafta for 21.89 million lats ($34.47 million), Riga's Central District Court stepped in to freeze the shares.
The crisis stems from accusations by the British firm Beacon Shipping Ltd., that it was unfairly disqualified from the auction because it did not submit a letter of credit verifying its bid before the June 25 deadline.
Judge Velga Gailite said the hold-up might last six months or longer while an investigation into Beacon's accusation is conducted.
Richard Reynert, chairman of Beacon Shipping Ltd., said his firm had been told by the English investment bank Williams de Broe, which was handling its bid, that the bid had been delivered on time.
"We were told that our bid had been forwarded to the Riga Stock Exchange," Reynert said. "We wanted to wait until the last moment before placing our bid. This whole process is highly political, and we were afraid of leaks."
Beacon Shipping was offering $75 million, or 0.45 lats per share, in its bid, Reynart said.
Ventspils Nafta paid 0.35 lats per share for a 31.27 percent stake in the company. Then the oil company raised its stake to 49.94 percent via the open market. Private investors bought the remainder of the stake in auction.
Miikka Haroma, assistant corporate finance director for Williams de Broe, said the bank acted in accordance with guidelines given by the Latvian Privatization Agency.
Haroma confirmed that Beacon Shipping did place a bid but said since there was no letter of credit, the bank felt it could not take the $75 million liability
"The privatization agency had already said that for a bid to be complete, a letter of credit had to be submitted with it," Haroma said.
Joakim Helenius, CEO of Trigon Capital, Beacon Shipping Ltd.'s representative in the Baltics, said he did not understand why Williams de Broe failed to inform the Riga Stock Exchange about its client's bid.
"To get a letter of credit is just a formality. We had it, but it had not been confirmed by (the bank) Credit Suisse. We tried to contact the person responsible for this at Credit Suisse, but he was at lunch," Helenius said.
Riga Stock Exchange officials said they first found out about Beacon's intentions more than an hour after the posted deadline.
"It's hard to imagine the consequences if we had accepted and cleared a bid from a Cyprus-registered offshore company (Beacon Shipping), and then it would turn out that the company had no money to pay for the shares it had bought," said RSE President Guntars Kokorevics
Ventspils Nafta has said it is considering fighting the court's decision and possibly demanding compensation for not being able to trade its new LASCO shares.
"Ventspils Nafta's reputation has already suffered significant damage due to the uproar caused by the auction results, considering Ventspils Nafta's status as a public joint-stock company and operations on the international market, but in this case the material interests of Ventspils Nafta are also concerned," said board member Mamerts Vaivads.
But Uldis Cerps, director of Latvia's Finance and Securities Commission, said a halt in trading was a normal procedure when an investigation to a claim is launched.
"This means that the 51 percent sold in the auction is frozen now and cannot be traded, but the remaining shares are absolutely tradable," he said.
Roberts Idelsons, director of the investment company Suprema, said: "Trigon Capital has only itself to blame. If Trigon Capital did have a valid letter of credit meeting the auction terms, why was it not submitted in due time during the international offer which was open for seven days?"
Reynert says Beacon is still interested in buying shares in LASCO.
"This would have been an ideal acquisition. We would get rid of all the bad vessels and build new vessels ideal for the Baltic trade," he said. "The best thing for LASCO would be for another shipping company to buy it. We would not strip the company, rather the opposite."
He said he had not ruled out contacting LASCO's major shareholders and making them an offer.
Beacon Shipping, registered in Cyprus, has been in operation for three years and owns three Panamax-type tankers.
It holds a one-third stake in Russia's Volgoneft shipping company, which holds a significant share of oil transport via Russian rivers.
The Latvian Shipping Company's privatization has not gone smoothly. It has brought down governments and shaken foreign investors' confidence. The privatization has regularly made headlines for seven years and it's still not over.
Here are the highlights:
1995 The Latvian Privatization Agency adopts regulations for privatizing LASCO.
Oct. 2, 1997 ? The Tufton Group and Lavinia Consortium are the only two bidders in the first failed attempt. Accusations of corruption and unfair auction conditions prevail.
June 16, 1999 - The Latvian Privatization Agency's board announced that Tufton Oceanic Ltd. and Eastline Maritime S.A. were the only two bidders in the second attempt to sell the company. Both companies failed to pay bid deposits.
July 8, 1999 - New privatization regulations are accepted by the Latvian Privatization Agency. Forty-one percent of LASCO shares are put up for auction; 15 percent are set aside for sale by privatization vouchers; 9.1 percent are kept by the Latvian Privatization Agency until further notice and 10 percent were meant to go to the state pension fund. On this attempt no company showed any interest.
Dec. 19, 2000 Privatization regulations are changed again. This time 68 percent of the shares were to be sold at auction, 15 percent for privatization vouchers, 6 percent to LASCO employees, 10 percent for the state pension fund and 1 percent would be kept in reserve by the Latvian Privatization Agency.
April, 2001 - The Italian firm D'amico and the oil company FAL show interest in the Latvian Shipping Company, but the process comes to a halt when both companies fail to pay deposits on their bids.
April, 2002 - Thirty-two percent of LASCO's shares are sold for privatization vouchers. The shares were bought by Latvijas Krajbanka and Hansabanka on behalf of unnamed clients.
June 25, 2002 - Fifty-one percent of shares are sold for cash. Most were bought by the oil firm Ventspils Nafta for $57.58 million. The British shipping firm Beacon Shipping files a complaint that its their bid for the entire 51 percent was unfairly disqualified. A Riga court upholds the complaint and the shares are frozen.